Table of Contents

Page No.

Introduction   2

Information Gathering         5

Analysis 14

Conclusion 16 

Bibliography 18

Contents of Appendix 19

Introduction

Topic chosen and its context

The topic I have chosen for my Research and Analysis Project is “An analysis of the financial situation of Abbott Laboratories (Pakistan) Limited”.

For more than a century, Abbott Laboratories has been working to advance health care for people around the world. Founded by a young Chicago physician, Dr. Wallace Calvin Abbott, in 1888, Abbott Laboratories has evolved into a diversified health care company that discovers, develops, manufactures and markets innovative products and services that span the continuum of care – from prevention and diagnosis to treatment and cure. Headquartered in north suburban Chicago, Abbott helps people around the world in the more than 130 countries. (http://abbott.com/corporate/corporate_overview.html)

Abbott Pakistan is part of the global healthcare corporation of Abbott Laboratories, Chicago, USA. 

Abbott Laboratories is a highly diversified global health care company devoted to the discovery, development, manufacture and marketing of pharmaceutical, nutritional and medical products, including devices and diagnostics. With over 70,000 employees worldwide and a global presence in more than 130 countries, Abbott is committed to improving people's lives by providing cost effective health care products and services that consistently meet the needs of our customers. 

Abbott started operations in Pakistan as a marketing affiliate in 1948; the company has steadily expanded to comprise a work force of over 1500 employees. Currently two manufacturing facilities located at Landhi and Korangi in Karachi continue to use innovative technology to produce top quality pharmaceutical products. 

Abbott Pakistan has leadership in the field of Pain Management, Anesthesia, Medical Nutrition, Anti-Infectives and Diagnostics. Our wide range of products is managed and marketed through four marketing arms. (http://www.abbott.com.pk/aboutus.html)

Main Business Areas in Pakistan:

Following are the main business areas of ALPL.

Pharmaceuticals Nutritional Diagnostics

Main Business AreasPKR in '000Net Sales Pharmaceuticals % Age as of Total Revenue Others % Age as of Total Revenue Total2002         3,532,006                                     88 472,204                                     12 4,004,210 2001         3,078,756                                     88 409,647                                     12 3,488,403 2000         3,003,263                                     90   350,264                                     10   3,353,527 

The above table highlights the percentage of revenue generated from each area of business. Others include Sales from Nutritional and Diagnostics Products. It is evident from the table that around 88-90% of Sales generated from Pharmaceuticals in the last three years. Sales from Nutritional and Diagnostics products can be increase by increasing the product portfolio. Nutritional products are prescribed as a supportive medicine and can be used in normal routine too.

Merger of ALPL with KPL:

“The scheme of Arrangement for the amalgamation of Knoll Pharmaceuticals Ltd. with Abbott Laboratories (Pakistan) Limited has been sanctioned by the Honorable High Court of Sindh, and has in accordance with its terms become effective on 25 April 2002.” (http://www.abbott.com.pk/news.html)

Reasons for choosing the topic

I have joined ACCA Technician Stage in Dec 1999, and since than Ratio Analysis have always attracted me because of its uniqueness. As the time passes and I reached Level C of Technician Stage the attraction towards analysis of financial statements increases. This was the main idea on choosing this topic.

Secondly, our family business is linked with Pharmaceutical Industry; this motivates me to choose the organization, which is in Pharmaceutical Industry.

Lastly, I thought doing a financial analysis of the large Pharmaceutical Company like Abbott Laboratories (Pakistan) Limited will help me in my family business and will also help me to do in depth analysis.

Aims and objectives of the report

The study aims to achieve the following:

1. To conduct SLEPT Analysis of the company.

2. To analyze the trend of financial performance of Abbott Laboratories (Pakistan) limited over three years 2000 – 2002 in respect of Revenue & Expenditure.

3. Financial evaluation of the year 2002 with respect to previous years and comparing it with its competitors.

Information Gathering

Primary sources used Reasons for their use Description of methods used to gather informationFeedback from Director Finance of the company. I thought its best to get feedback from Director Finance of the company to explore some key information. In meeting with Director Finance I came to know about current strategy and major investments that will be made in the near future by the company.Annual Report for the Years ending 30th November 2000, 2001 & 2002. Annual reports are the best source of information about the company. I gather Annual Reports from company’s registered office and have explained them about my research project.     

Secondary sources used Reasons for their use Description of methods used to gather information.Abbott Laboratories (Pakistan) Limited Website. (http://www.abbott.com.pk)

Abbott Laboratories, Chicago, USA. (http://www.abbott.com)Available online information about the company guides me to get the initial understanding about ALPL. I browsed the website of the ALPL and Abbott Laboratories, Chicago, USA. I came to know about the history of the company and the main business areas of the company.Designed questionnaires to get the information from International Medical Statistics data. IMS Data is not for public use as it is a restricted data and cannot be copied. IMS contains fact about every market share of Pharmaceutical Market in the world. As IMS Data was not for public use I decided to use questionnaire because this was the only way to get the basic financial information about Pharmaceutical sector in the world and in Pakistan market especially. This questionnaire was filled by the local pharmaceutical company officials, and from that I came to know the total market share of Pakistan Pharmaceutical Market, and the share Multi-National Companies are having.Newspapers having Business and Economics information. As I was doing SLEPT analysis to scan the external environment of the company, it was necessary for me to keep myself up to date on the external environment, which is affecting the Pharmaceutical business. Most of the news papers like Business Recorder (http://www.brecorder.com) and Daily Dawn (http://www.dawn.com)were available on internet, so it was easy for me to get access of that information which was relevant to me.Karachi Stock Exchange Website.(http://www.kse.net.pk)To get the information about the share price of the company and its competitors. I browsed the website and found the average share price, useful analysis and detailed information of every pharmaceutical company listed on Karachi Stock Exchange. 

Analysis of Information

Short introduction of Pharmaceutical Market

From the questionnaire that I designed, I analyze the following information of year 2002.

Total World Pharmaceutical Market: USD 364 billionTotal market share of Pakistan: USD 900 millionShare of Multi-National Companies: 60%Share of Local Companies: 40%

ALPL share in Total Pakistan’s market is: 7.73%ALPL share in total Multi-National Companies: 12.89% 

SLEPT Analysis

Social: As the trend of health awareness and hygiene conciousness are increasing in Pakistan, the Revenues of Pharmaceutical company is also increasing.Legal: Pakistani Pharmaceutical market is regulated by the Ministry of Health, Pakistan. Ministry of Health has over the years impose increase in price restriction on Pakistan Pharmaceutical Market. Economic: Economic sanctions against Pakistan in early 2000 affect the pharmaceutical industry as a whole. All of the imports are covered by foreign exchange contracts; hence the affect of the devaluation of local currency is minimized up to certain extent.Political: After the Army coup in October 1999, the political situation becomes unstable and this affects the economic situation too. In the year 2000 country’s economic position moves towards stability as the transfer of power towards the civil people begin. After the attack on World Trade Centre and attack on Afghanistan starts which mostly affects Pakistani Business. 

Technology: Management information system needs to be up to date, because old systems might weaken the timely reporting. In the light of this ALPL has implemented J.D. Edwards, an ERP software in its office to ensure availability of timely & accurate reports.

Trend Analysis

For the purpose of trend analysis I’ll be analyzing three years starting from 2000 till 2002, furthermore I have restated the figure of the year 2000 to make it comparable with the year 2001 & 2002 due to the merger of ALPL with KPL.

The key benefits of trend analysis are as follows:• Identify trends and warning signs • Capitalize on new opportunities in the near horizon • Eliminate uncertainty by analyzing the past• Responding effectively to the changes required for the future growthRevenue Trend:

During the period 2000-2002 the revenue of the company had increased with an average rate of 6.28% (Appendix 1a) with 14.79% increase in year 2002, the company manages to achieve this sale despite of imposition of 15% sales tax on pharmaceuticals products on March 21, 2002. This result in resistance from consumers in buying the products and then sales tax was suddenly withdrawn on August 23, 2002. There is an increase of 4.04% in year 2001 as compared with year 2000. The increase in Revenue in 2002 can be attributed to increase product portfolio and volume of products, as Ministry of Health put a strict eye on the increase in medicine prices.

Expenditure Trend:

From the notes of the accounts I have bifurcated Administration expenses and Selling & Distribution expenses. This will help me to identify the effect of increase or decrease in Selling & Distribution expenses on Revenue. I have classified expenses in three parts.

Cost of Good Sold Administration Expenses Selling and distribution expenses

Cost of Goods Sold Trend:

On averages Cost of goods sold contributes 77.64% of the total expenses. As the revenue rises cost of goods sold rises automatically. In the year 2001 cost of goods sold increase by 6% with respect to year 2000 (Appendix 1b) revenue in 2001 does not increase in line with cost of goods sold this has affected the profitability of the company. In year 2002 cost of goods sold increases by 9% as compared with year 2001.

Administration Expenses:

Administration expenses contribute 16.32% on average towards total expenses. They grew at an average rate of 6.63%. The general reasons in increase of these expenses are as follows.

Due to inflation Due to merger

In the year 2001 Administration expenses rise by 7% as compared with the year 2000. In the year 2002 Administration expenses rise by 13% as compared with the year 2001. The main reason behind this is due to an increase in number of employees which in turn increase in Salaries, wages, allowances and staff welfare which were Rs 244,600,000 in 2001 and Rs 304,996,000 in 2002. Another reason is due to increase in royalty payments which were Rs 3,410,000 in 2001 and Rs 5,573,000 in 2002. This increase was partially set off by the decrease in other administrative expenses such as Rent & rates, auditors’ remuneration and repairs & maintenance.

Selling & Distribution Expenses:

On average these expense contributes 6.04% of the total expenses. Salaries & distribution expenses decrease at an average rate of 1.65%. The company showed an increase of 3% in year 2001. This is due to increase in advertising, samples and sales promotion expenses. As a pharmaceutical company these type of expense must be incurred for promotion of new and old medicines. Selling & Distribution expenses decreases by 8% in the year 2002, the main reason is the decrease in advertising, samples and sales promotion expenses. ALPL has managed these expenses successfully and due to the merger these expenses had been cut down from Rs 184,639,000 in year 2001 to Rs 168,084,000 in year 2002.

Financial evaluation of the year 2002 with respect to previous years and comparing it with its competitors.

Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick indication of a firm's financial performance in several key areas.(http://www.prenhall.com/divisions/bp/app/cfldemo/RA/RatioAnalysis.html)

Ratios can be divided into following categories

Liquidity / Short term solvency ratios Profitability ratios Activity Ratios Long term solvency ratios Shareholders ratio

Liquidity / Short term solvency ratiosShort-term Solvency Ratios attempt to measure the ability of a firm to meet its short-term financial obligations. In other words, these ratios seek to determine the ability of a firm to avoid financial distress in the short-run. (http://www.prenhall.com/divisions/bp/app/cfldemo/RA/LiquidityRatios.html)

These ratios can be divided into two categories.

Current Ratio Quick (Acid) Ratio Interest Cover

Current Ratio

The current ratio measures current assets: current liabilities. In general terms we are comparing assets which will become liquid in approximately 12 months with liabilities which will be due for payment in the same period. (Frank Wood, 1994)

As shown in Appendix 2(a), In 2000-2001, the current ratio was 1.82:1; company’s competitor like GSK shows the same ratio of 2.96:1, and Parke-Devis shows the current ratio of 3.35:1. As compared with major competitors company’s current ratio is little bit low in the year 2000.In 2001-2002, the company manages to improve the current ratio further and the ratio moves to 2.11:1; GSK shows the same ratio of 2.98:1 and Parke-Devis 3.55:1. If we see in general ALPL’s current ratio is good in 2001, but the competitor’s shows very high ratios in 2001. Having too much high current ratio is dangerous too because it shows that too much cash is blocked in Receivables, stocks and advances etc.In 2002-2003, ALPL manages to sustain this growth and moves to 2.48:1, its competitor’s GSK shows a little decline and ratio moves to 2:83:1, but Parke-Devis shows a greater increase and moves to 4.05:1 which is alarming for Parke-Devis. ALPL has maintained this ratio.

Quick Ratio

In order to refine the analysis of the current ratio another ratio is used which takes only those current assets which are cash or will convert very quickly into cash. This will normally mean cash and debtors or current assets less stock-in-trade. (Frank Wood, 1994)

In quick ratio ALPL has achieved a strong growth especially in the year 2002; this is because ALPL has managed to reduce its current liabilities despite of the merger with KPL.

In 2000-2001, the quick ratio was 1.38:1 (Appendix 2a).In 2001-2002, the company’s quick ration has decreased a little to 1.11:1, but this does not affect much. This is due to the merger, as the merger increases some liability to the parent company and it takes one or two years to settle these amounts.In 2002-2003, ALPL quick ratio moves to 1.30:1, the ratio has improved, which shows that company is again moving in good position with respect to liquidity and company has achieved success with respect to reducing liquidity.

Interest Cover

Although Interest Cover ratio is classified under Long-Term Solvency ratio, but I have used this ratio under the heading of short-term liquidity ratio because ALPL is paying interest only on short-term running finance.

Interest cover measures how much profit is generated from which interest is paid. As ALPL is not having Long-term loans that is why interest cover it too high because the interest that is being paid is very much low as compared with Profit before Interest & Taxation. As shown in Appendix 2(a), in the year 2000 interest cover was 14.11 times, in 2001 i.e. after the merger ALPL has reduce the interest payable and interest cover increases to 39.56 times. As the company is getting bigger in terms of Revenue generation, interest payable is reducing gradually. In 2002 interest cover moves to 143.03 times. ALPL competitor Parke-Devis is also all equity financed and the interest cover ratio is more or less the same.   

Profitability Ratios

Profitability is the end product of the policies and decisions taken by a firm, and is its single most important measure of success. (Frank Wood, 1994)

Company has increased its operating profit by 54.31% as compared with year 2001. The reasons are as follows:

Due to merger of operations; this increases the sales revenue which in turn increases operating profit. Achievement of economies of scale due to merger; this reduces the certain expenses which increases profitability.

Profitability ratios includes the following

Net Profit Ratio

ALPL has strong profitability position, as shown in Appendix 2(b) the net profit to sales ratio has been varied between 11.65% - 10.97%. The reason for the decline in the net profit in 2001 as compared with 2000 is because that Revenue and Expenditure does not rise with same percentage. Cost of goods sold, Administrative and Distribution Expense has increase faster than sales, and this in turn reduces the net profit ratio in 2001. However, after the merger completed its one-year i.e. in year 2002, the company’s profitability position increases a little bit from 10.56% to 10.97%, this shows that ALPL is moving towards better profitability position. In 2001, GSK ratio was again 7.30% but Parke-Devis ratio was 19.25%. Net Profit Ratio of GSK and Parke-Devis is 7.75% & 10.62% respectively in 2002. In GSK this is due to presence of Long-Term Loans, which makes the Net Profit Ratio lower; on the other hand Parke-Devis has the same situation like ALPL in terms of

loans, which makes its ratio, approximately equal to ALPL net profit ratio of 2002. In 2001, GSK Net Profit Ratio was 7.30%. ALPL has able to maintain a good Net Profit Ratio as compared with its major competitors.

Return on Capital Employed

It measures the returns that a company is realizing from its capital. It is calculated as profit before interest and tax divided by the difference between total assets and current liabilities. The resulting ratio represents the efficiency with which capital is being utilized to generate revenue. (http://www.investorwords.com/cgi-bin/getword.cgi?5770)

As shown in Appendix 2(b), the company’s ROCE has shown a decline from 29.11% to 22.07%, the same argument applies here that merger increases the assets of the company which reduces ROCE substantially and in the first year of the merger company cannot increase the profits as compared with Total Assets less Current Liabilities, but in 2002 ALPL has managed to increase the ROCE to 23.02% which is a little increase as compared with 2001. In 2001 GSK & Parke-Devis reported a ROCE of 11.11% & 27.14% respectively. In 2002 GSK reported a ROCE of 14.84% which is much lower than of ALPL; Parke-Devis reported a ROCE of 14.84%. Overall ALPL reported a healthy ROCE as compared with its competitors.

Return on Equity

The return on equity is a measure of profitability in relation to shareholders’ investment. Shareholders’ investment equals capital plus free reserves. (Javed Zuberi, 2002)

The company’s ROE showed a positive increase over the three year period, which reflects that shareholders’ return is increasing over the period, which is good sign and this will increase the market value of the company’s share price, which in turn increases the shareholders’ wealth.Appendix 2(b) showed that in 2001 ROE rises to 22.36% from 20.38% in the year 2000. And in year 2002 ROE rises to 23.19%. GSK and Parke-Devis reported a ROE of 15.25% & 14.04% respectively. As the ROE increases, the owner’s equity increases substantially over the three year period.

Activity Ratios

Activity ratios measure the efficiency of the management. These ratios help management in some aspects when making or changing some of the company’s operational policy.

Activity ratios can be divided into the following.

Debtors Collection Period (in days) Stock turn over (in days)

Debtors Collection Period (days)

In normal course of business most of the sales carried out on credit basis. Management should keep a proper eye on the collection period from debtors. This will be very useful for the company as it highlights how much days it will take to recover funds from debtors.

As shown in Appendix 2(c) debtors collection period has moved from 11 days to 7 days. The collection period is too low because company had collected all the major receivables during the year and very little amount is outstanding at the year end. However company has tries to reduce this period from 11 to 7 days. The average collection period is around 50 days in the industry. GSK and Parke-Devis showed the same trend in the year 2002. In ALPL the receivable turn over is low due to the fact that major receivable were outstanding at the year-end. ALPL has able to collect major amount of money to avoid any cash flow during the year.

Stock turn over (days) 

This ratio highlights for how many days the stock is held in company’s warehouse or after how many days the new order will be placed to obtain new stock. It is very much necessary because sometimes companies order high-level of stock and this creates liquidity problems because stocks have holding costs and cash ties up in stock. As the pharmaceutical industry involves highly advanced chemicals, this needs special environmental conditions. Pharmaceutical companies should forecast their sales so the stock will be ordered in connection with the forecasted sales.

Appendix 2(c) shows the stock turn over in days. ALPL has reduced its stock turn over from 136 to 116 days. Stock in trade includes Raw materials, Work in progress and finished goods. This highlights that ALPL is pursuing a policy of reducing the stock in trade. This will avoid the company to be in better position regarding cash flows. To sum up, the changes in above two ratios shows that ALPL is efficiently managing its activity ratios.

Long-Term Solvency Ratios

Debt and gearing ratios are concerned with a company’s long-term stability: how much the company owes in relation to its size, whether it is getting into heavier debt or improving its situation, and whether its debt burden seems heavy or light. (ACCA Study Text Paper 3.6)

After analyzing the annual reports of ALPL, I found that it is all equity financed. Abbott Laboratories USA, Abbott Equity Holding Ltd, UK, ABBOTT LABORATORIES PACIFIC LIMITED and Staff under Provident Fund hold 78.67% shares of ALPL. Other shareholder who includes Institutions, Banks, Individuals, CEO and Directors holds only 21.33% shares.

ALPL is 0% geared, as there is no long-term debt. There is short-term running finance, which is classified under Current Liabilities. The advantages for the company to be all equity finance are as follows:

No heavy interest payments More profit is available for distribution to shareholders More profit is available for re-investment

Some disadvantages are as follows:

Company looses the tax relief on interest payments In low geared company, assets might change rapidly and profits might not be stable, if not organized properly Normally the cost of equity is high as compared with cost of debt

Shareholders’ Investment Ratios

These are the ratios which help equity shareholders and other investors to assess the value and quality of an investment in the ordinary shares of a company. (ACCA Study Text Paper 3.6)

Dividend Yield

This measures the real rate of return on an investment in shares, as distinct from the declared dividend rate, which is based on the nominal value of a share. (Frank Wood, 1994)

In the year 2000 ALPL reported the dividend yield of 7% in comparison GSK reported a dividend yield of 8.01%. In 2001 ALPL increases its dividend per share and there was a slight increase in the market price too, this in turn increases the dividend yield to 10%, GSK reported a decrease in dividend yield and it moves to 6.86%. In 2002 the overall economic situation of Pakistan improves and this results in increase in share price of all the major listed companies on Karachi Stock Exchange, but in comparison ALPL didn’t increases its dividend per share but in fact maintained it at Rs 5.5 per share, this result the dividend yield drop again to 7%, but GSK increases its dividend

per share in 2002 and its dividend yield moves to 9.75%.

Dividend Cover

This shows how safe the dividend is or the extent of profit retention.

Over the part three years ALPL has maintained its dividend cover to 2 times (Appendix 2d), the main fact behind this is that company is pursuing a constant ratio of dividend payments with respect to Profit Available to Ordinary Shareholders.

P/E Ratio

A valuation ratio of a company's current share price compared to its per-share earnings. In general, a high P/E means high projected earnings in the future. However, the P/E ratio actually doesn't tell us a whole lot by itself. It's usually only useful to compare the P/E ratios of companies in the same industry, or to the market in general, or against the company's own historical P/E. (http://www.investopedia.com/terms/p/price-earningsratio.asp)

As shown in Appendix 2(d) ALPL’s P/E ratio grow from 6.51 times in 2000 to 7.60 times in 2002. Here competitor’s information is very much necessary because it will help me analyze how ALPL is achieving growth in earning as compared with its competitors.GSK reported a P/E ratio of 7.64 times in 2002; Parke-Devis showed P/E ratio of 7.10 times. This shows that in 2002 pharmaceutical sector is overall achieving growth in their earnings.

CONCLUSION

What the report has shown in relation to aims and objectives

The Financial Evaluation was done according to Aims and Objective defined above. Upon scanning the external environment it was seen that increasing trend of merger around the world and in Pakistan has emerged quite effectively over the last few years. ALPL is also enjoying the synergies of merger with KPL worldwide and in Pakistan. This in turn increases the product portfolio and increases the profitability of the company. ALPL has faces immense competition with GSK, as it is the largest Pharmaceutical Company in Pakistan. The future strategy of the ALPL should be to give a strong competition to GSK, and other major multi-national companies like Aventis, Parke-Devis, and MSD.

Revenue of the company showed a strong increase over the past three years. There were little reductions in Revenue of the company in 2001 because of problematic economic situation in Pakistan, but ALPL has recovered from this in 2002 by increasing its Revenue by 14.79%, with the average increase of 6.28% over the three year period.

In the area of expenditure the company has increased its expenditure in comparison with the inflation rate of the country. There was a major increase in Administration Expenses because of the merger in 2001. Company should focus in this area to cut down the expenses because it might hurt the profitability of the company in the future.

The company manages to improve it financial situation in major areas like Short-Term Liquidity, Profitability, and Shareholder’s investment ratio. The large increase in the operating profit of the company in 2002 gives evidence of it. ALPL has manages to grow its current ratio and match with its competitors but the company should be aware that too much increase in the current ratio does not present good condition because too much of the cash is tied up in assets. In respect of Quick ratio it has maintained the benchmark of 1:1 in all the three years. ALPL last reported quick ratio was 1.30:1, which is quite good as compared with the benchmark.

Its Long-term solvency ratios like Debt ratio and Gearing Ratios are nil because of the non-existent of long-term loans. ALPL can borrow some loans or issue Debentures if there is any shortage of

money. But as the major share-holding of the company is with Abbott Associated Companies, shortage of funds in the long-term is not a big problem. ALPL might attract some good investors because there are no loans and some might want to invest by giving loans to the company, but this strategy needs to be chalked out before a decision takes place, and a prior approval has to be taken from Abbott USA.

Shareholder Investment ratio over the three year period has shown an increasing trend. Other companies like GSK, Parke-Devis has shown increasing trend too. To sum up we can say that the overall Pharmaceutical Industry in Pakistan is towards major growth.   

Upon discussion with Management and analyzing the Annual Report for the year ended 2002 I came to know that the factory of KPL is situated at Korangi which is 15km away from ALPL which is situated at Landhi. After the merger of both the companies it was difficult and not cost-effective to do the production on both the factories. On considering this Board of Directors of ALPL has approved to expand its production capacity at Landhi site and close the manufacturing facility at Korangi. The funds from the disposal of the factory will be covering the part cost of the new factory which will be building up for Rs 330 million. The closure and the manufacturing of new facility will be finished by the end of 2004. The new facility will be constructed according to the GMP (Goods Manufacturing Practices) requirement, to keep the manufacturing facility upgrade with the standards. Abbott USA and the other affiliated companies will provide technical expertise on this issue. The other reason behind this is that to reduce the cost and to consolidate the activities of the company.

This can be concluded that Pakistan Pharmaceutical Industry is operating in highly regulated environment in which increase in the price of product is monitored very closely. In spite of this ALPL is having a dominant position in the Market in terms of financial position. And the future growth of the company is very much high.

Bibliography

Abbott Laboratories (Pakistan) Limited, [Online], Available:http://www.abbott.com.pk/aboutus.html [2003, July 15] 

Abbott Laboratories USA: Global Home, [Online], Available:http://abbott.com/corporate/corporate_overview.html [2003, July 15] 

ACCA STUDY TEXT, PAPER 3.6 (2001) Pakistan Edition, BPP

Corporate Finance Live, by Rock Mathis: [Online], Available:http://www.prenhall.com/divisions/bp/app/cfldemo/RA/RatioAnalysis.html [2003, July 20] 

Frank Wood (1994) Business Accounting 2. Sixth Edition, Pitman Publishing

Investopedia.Com, [Online], Available:http://www.investopedia.com/terms/p/price-earningsratio.asp [2003, August 05]

Javed H. Zuberi (2002) Company Accounts. 

Price-Earnings Ratio – P/E, [Online], Available:http://www.investopedia.com/terms/p/price-earningsratio.asp   [2003, August 20]

Return on Capital Employed Definition, [Online], Available:http://www.investorwords.com/cgi-bin/getword.cgi?5770 [2003, August 01]

CONTENTS OF APPENDIX

Page No.

REVENUE TREND 20

EXPENDITURE TREND 21

SHORT-TERM LIQUIDITY RATIOS 22

PROFITABLITY RATIOS 22

ACTIVITY RATIOS 23

SHAREHOLDERS’ INVESTMENT RATIOS 23

Appendix 1(a) Revenue TrendAmount in PKR '000Year Net Sales Percentage Change2000     3,352,987.00                           -   2001     3,488,403.00                       4.04 2002     4,004,210.00                     14.79 Average Increase/(Decrease) 6.28%

Appendix 1(b)

Expenditure TrendAMOUNT IN PKR '000Type of Expense 2000 2001 2002Cost of Goods Sold         2,231,925               2,367,999             2,592,018 Administrative Expenses           462,476                   492,688           558,484 Selling & Distribution Expenses           187,002                   192,071           177,346 Total Expenditure         2,881,403               3,052,758       3,327,848 % Age Change in COGS                     -                           6               9.46 % Age Change in Admin Exp.                     -                           7                   13 % Age Change in S & D Exp.                     -                           3                   (8)COGS % Age as total Expense               77.46                     77.57             77.89 Admin % Age as total Expense               16.05                     16.14             16.78 S & D % Age as total Expense                 6.49                       6.29               5.33 

Average Increase/(decrease)COGS Admin Exp S & DAverage Change in % Age 5.19 6.63 -1.65Average % Age of total expenses 77.64 16.32 6.04

Appendix 2(a) SHORT-TERM LIQUIDITY RATIOS

Year 2000 2001 2002

Current Ratio 1.82 2.11 2.48 Figures in PKR '000 Current Assets     1,017,250.00     1,721,477.00     1,729,840.00 

Current Liabilities         556,517.00         815,734.00         694,972.00 

Quick Ratio 1.38 1.11 1.3 Figures in PKR '000 Quick Assets         770,692.00         907,471.00         904,572.00 Current Liabilities         556,517.00         815,734.00         694,972.00 

Interest Cover (times)                 14.11                 39.56               143.03 Figures in PKR '000 Profit Before Interest & Tax         472,083.00         469,286.00         726,174.00 Interest Payable         33,449.00         11,863.00           5,077.00 

Source: Annual Accounts

Appendix 2(b) PROFITABILITY RATIOS

Year 2000 2001 2002

Net Profit(Loss) Ratio 11.65% 10.56% 10.97% Figures in PKR '000 Profit/(Loss) after tax         296,303.00         368,419.00         439,250.00 Sales     2,542,548.00     3,488,403.00     4,004,210.00 

Return on Capital Employed 29.12% 22.08% 23.03% Figures in PKR '000 Profit/(Loss) after tax         296,303.00         368,419.00         439,250.00 Total Assets less Current Liabilities     1,017,531.00     1,668,695.00     1,907,464.00 

Return on Equity 20.38% 22.36% 23.19% Figures in PKR '000 Profit/(Loss) after tax         296,303.00         368,419.00         439,250.00 Owners Equity     1,454,196.00     1,647,874.00     1,893,981.00 

Source: Annual Accounts

Appendix 2(c) ACTIVITY RATIOS

Year 2000 2001 2002

Debtors Collection Period (days)                     11                       8                       7 Figures in PKR '000 Debtors         73,381.00         77,698.00         76,839.00 Net Sales     2,542,548.00     3,488,403.00     4,004,210.00 

Inventory turnover period (days)                   136                   125                   116 Figures in PKR '000 Closing stocks             829,767             814,006             825,268 Cost of goods sold     2,231,925.00     2,367,999.00     2,592,018.00 

Source: Annual Accounts

Appendix 2(d) SHAREHOLDERS' INVESTMENT   RATIOS

Year 2000 2001 2002

Dividend Yield 7% 10% 7%

Dividend per share 4 5.5 5.5 Average market price per share 53.8 57 77.75

Dividend Cover (times)                       2                       2                       2 

Profit Available to Ord. Shareholders       297,269,000       370,337,000       440,181,000 Dividend declared       192,351,000       208,406,000       193,143,000 

P/E Ratio                 6.51                 6.64                 7.60 

Average market price 53.8 57 77.75 Earning per share                 8.27                 8.58                     10 

Source: Annual Accounts