PROPOSAL FOR MS THESIS

FINANCIAL ANALYSIS OF CHERAT CEMENT COMPANY LIMITED KPK

BY: BIBI SARAREGESTRATION #BBA HONS (2009-2013)TO: MR. SAEED AKBAR

NORTHERN UNIVERSITY NOWSHERA(Main Campus) Wattar Walai Ziarat, Kaka Sahib Road, Nowshera, KPKPh: 0923-210641-42APPROVAL SHEETFINANCIAL ANALYSIS OF CHERAT CEMENT COMPANY LIMITED KPKSupervisor:_________________________________________________Mr. Saeed AkbarLecturer. Deptt of Mgt SciencesNorthern University Nowshera

Member Research Committee:__________________________________Mr. Abdul WaheedHOD. Deptt of Management SciencesNorthern University Nowshera

Member Research Committee:_________________________________Mr. Junaid IqbalLecturer. Deptt of Mgt SciencesNorthern University Nowshera

CHAPTER # 11.0 INTRODUCTIONThe progress of any country depends on the industrial development of the country. To gain a power in the world country needs to be industrially advanced and developed. To get success, every country needs to be respected for what it produces and contributes to the world market. Any economic activity which deals with manufacturing of goods by processing raw material is called industry. It is the form of economic and commercial activity in a country. An industry helps to contribute to the national income.Even for the improvement of most modernized production of cement, industrialization is necessary. Cement industry is indeed a highly important segment of industrial sector that plays an important role in the socio-economic development of a country. Throughout the world the top most producers of cement are China, India and USA. As the most populated state of the world their combined total makes half of the world total. According to research China constantly has produced more cement than any other country from last 18 years. Approximately 3.3 billion tons of cement is consumed globally of which 1.8 billion tons is manufactured by china.Since independence of Pakistan a country production capacity had less than half a million tons per annum but by now it has exceeded 10 million tons per annum due to establishment of new manufacturing facilities. Pakistan was net importer of cement but due to privatization new owner supported by financial help pushed the industry to a point where a country had reached to an oversupply situation. Pakistan cement market is divided in to two regions the one is northern region and the other is southern region. Northern region contain areas of Punjab, KPK, Azad Kashmir and upper parts of Baluchistan whereas the southern region contains the entire province of Sindh and lower part of Baluchistan. In fact southern region of a country always produced surplus cement but now due to new plants opened in northern region has become almost self-sufficient in supply of cement.Pakistan has one of the highest population growth rate in the world this has prompted a sizable demand for housing facilities in the country. Urban areas have demanded 0.6 million units per annum and due to greater urbanization demand of cement is predicted to grow up to 7% per annum. Demand for cement will go high for infrastructure units due to commencement of work on motor ways, power plants, Islamabad new city, Karachi package and Ghazi Brotha dam. This will cause demand of cement to grow at high rate.Recently there were 24 cement manufacturing units in the country but due to closure of National cement Karachi unit it is reached to 23 units. Out of these 23 units, 20 units produce ordinary Portland cement, 2 units produce white cement and remaining one unit produce slag cement. Cherat cement located in KPK has capacity of 0.72 million per annum. Cherat was the first cement plant in the private sector. The company is owned by Ghulam Faruque group who are the owner of Cherat paper sack as well. The main target market of Cherat cement is upper Punjab and KPK. Recently the company has increased its capacity and has expended their business. Due to expansion they are in a position to take advantage to provide cement to northern areas that have high demand for it. Expansion had helped them to achieve economies of scale. As Afghanistan is in need of reconstruction after devastation of a long war it will be beneficial for Cherat to export cement to Afghanistan.

Cement industry is indeed a highly important segment of industrial sector that plays an important role in the socio-economic development of a country. The first name in the field of cement manufacturing was listed in 1981 in Karachi stock exchange. The factory is built on Cherat Hills and manufacture high quality grey Portland cement. The cement is made on the most computerized system. There is upgraded quality control system and modern production system. CCCL is the largest producer and supplier in Pakistan. Production capacity of CCCL is 2500tons/day This research report makes us to know about financial strength of Cherat cement industry and its performance. Financial statement analysis is a method used by interested parties such as shareholders, creditors and management to evaluate the conditions and performance of the firm. Ratio analysis, trend analysis and common size analysis are used in this research which is the most common forms of financial analysis. Financial ratio analysis is an important topic and is covered in all mainstream management sciences textbooks. It is widely used to summarize the financial health of a company. This research report will be of great use for investors, creditors as well as the students of, management sciences and for those who are interested in finance particularly.

1.1 PURPOSE OF THE STUDYThe main purpose of this research study will be examining financial position, analyzing profitability, analyzing market strength and drawing conclusion about overall performane of CCCL over a period of 2007-2011. The main objectives will be:1. To examine the financial position of Cherat Cement Company Limited.2. To analyze the profatibility of Cherat Cement Company Limited.3. To analyze the market strength of Cherat Cemnet Company Limited.4. To draw conclusions about the overall performance of the company from 2007-2011.5. 1.2 SIGNIFICANCE OF THE STUDYThis research is important for investors and management as well. It is an anlayst microscope and let them to get a better view of financial health of a company.The relationship between the two items of fiancial data express in the form of ratio and then interpreted with the view to evaluating the financial and performance of the firm ,from the basis of the financial ratio analysis.Ratio anaylsis is the fact that allow the company to compare its performance with that of other companies in the same industry .it gives the potential investors a quick snap shot of the financial condition of a business .Ratios analysis are important both internally and externally. On internal basis we do planning and evaluate management through financial ratio analysis and externally we become able to make policies, monitor performance, take investment decisions and manage credit grantings etc.

CHAPTER # 22.0LITERATURE REVIEWDoron Nissim,Stephen H.Penman(2003) made research on Financial Statement Analysis of leverage and how it informs about protability and Price-to-Book Ratios. This research present financial statement analysis that distinguishes leverage arises in nancing activities from leverage that arises in operations. This study yields two leveraging equations, one for borrowing to nance operations and one for borrowing in the course of operations. This research concludes that balance sheet line items for operating liabilities are priced differently than those dealing with nancing liabilities. Doron Nissim, Stephen H.Penman (2001) do research on ratio analysis and equity valuation. The researcher research that standard portability analysis is integrated and unlimited and is complemented with an analysis of growth and analysis of operating activities is well-known from the analysis of nancing activities. This study present a matter of pro forma analysis of the future, with forecasted ratios viewed as building blocks of forecasts of payoffs. The analysis of current nancial statements is seen as a matter of identifying current ratios as predictors of the future ratios that determine equity payoffs.Jane A. Ou and Stephen H. Penman(1989) have did research on ratio analysis and equity the researcher did work on financial statement analysis that combines a huge position of financial statement things into one summary calculate which indicates the way of one-year-ahead earnings changes. Positions are taken in stock on the basis of this calculation during the period of 1973-1983 which engage canceling long and short location with zero net investment. The two-year investment-period return to the long and short location in the order of 12.5%.and after adjustment for size effects the return is about 7.0% and these returns cant be explained by nominated firm risk characteristics.E. Eldon Eversull and Beverly L. Rotan (1997) have done research on Analysis of Financial Statements Local Farm Supply, Marketing Cooperatives. In this report they examined the balance sheet and income statement of a local firm supply and marketing cooperatives, they compared 1995 and 1994 and trend above the past 10 years. The facts in this research stand for four cooperatives size and types .general size of income statement and balance sheet evaluate dissimilar cooperative size and type. For this comparison balance sheet and income statement items and ratios are used.

Mary Fischer, Teresa P. Gordon, Janet Greenlee, & Elizabeth K. Keating (2003) did research on An Analysis of the Financial Statements of U.S private colleges and universities. This study analyzed the private organizations that provide permanent contribution in higher education of US. They wanted to find out that whether the discretions provided to them by auditing and accounting standards were advantageous to them or not .As these standards provide an operating way to them. They found that about 60% of the institutions report an operating measure but difference lies in their inclusion and exclusion of items.

Mabwe kumbirai and Robert Webb (2010) did research on a Financial Ratio Analysis of commercial bank performance in South Africa. They investigate the performance of south Africas commercial banking sector from the period 2005-2009.financial ratio are used to measure the profitability, liquidity and credit quality performance of five large south Africa based on commercial banks. Their study is based on generally bank performance increased considerably in the first two years of the analysis. A significant change in the trend is notice at the onset of the global financing crisis in 2007, getting its peak period from 2008-2009.

Chunhui (Maggie).Grace OFarrell Kwok-Kee Wei and Lee.J.Yee (2007) did research on ratio analysis comparability between Chinese and Japanese firm. The main purpose of their search was Firms in different countries operate in different business environments and prepare financial statements. Benchmarks for assessing financial ratio of a firm in different countries are likely to be different .during conducting the financial ratio analysis each country having its unique cultural, business, and financial have to be taken into financial data. The methodology of their search is to study and compares ten main financial ratios of 75 Chinese firms with financial ratio of 75 matched samples Japanese firms to determine if the common benchmark of each of the financial ratio can be applied in both countries .their findings during the search shows an important difference in liquidity, solvency and activity ratio between firms from these two countries.

Enekwe Chinedu Innocent, Okwo Ifeoma Mary and Monday Matthew (2013) have did search on financial ratio analysis of profitability in Nigerian Pharmaceutical Industry.The main purpose of their search is to examine the relationship between the financial ratio analysis and profitability of the Nigerian pharmaceutical over the last past eleven years from the period 2001-2011. These financial ratio analyses have immense potentials to help organizations in improving their revenue generation ability as well as minimization of costs. The researcher used five variables for the analysis that are Inventory turnover ratio, debtors turnover ratio and creditors velocity, total assets turnover ratio and gross profit margin. Dependent variables are represented by gross profit margin while independent variables are inventory turnover, debtors turnover, and creditors velocity and total assets turnover. The secondary data were obtained from the financial statements of the selected pharmaceutical companies selected statements the data have been analyzed usingDescriptive research method and multiple regressions to find out the relationship between the variables. So the result shows that there is negative relationship between all independent variables with profitability in the Nigerian pharmaceutical industries. The results further suggested that only 17.8% of the independent variables are determinant factors of profitability in the enterprises sampled while 82.2% of the major factors are determine from other factors outside the independent variables.

Florenz C. Tugas (2012) did research on Comparative Analysis of the Financial Ratio of listed firms belonging to the Education Subsector in the Philippines. The main aim behind this research is to analyze the financial condition of the three firms for the period of (2009-2011) using liquidity ratios, activity ratio, leverage ratios, profitability ratios, and market value ratios. For the liquidity ratios were used: current ratio; quick ratio; acid test ratio; cash flow liquidity ratio; average collection period; and days payable outstanding. For activity, the following ratios were used: accounts receivable turnover; accounts payable turnover; fixed assets turnover; and total assets turnover. For leverage, the following debt ratio; debt to equity ratio; and times interest earned. For profitability, the following ratios were used: operating profit margin; net profit margin; return on total assets; return on equity; and basic earning power ratio. For market value, the following ratios were used: price-earnings ratio; market-book ratio; and dividend yield.Ratios were used: debt ratio; debt to equity ratio; and times interest earned. For profitability, the following ratios were used: operating profit margin; net profit margin; return on total assets; return on equity; and basic earning power ratio. For market value, the following ratios were used: price-earnings ratio; market-book ratio; and dividend yield. . Necessary information derived from these financial statements were summarizedand used to compute the financial ratios for the three-year period. To provide a basis for analysis, for each financial ratio, the firm adjudged as the best one (using rule of thumb and ratio trends) was given three points, the next one, two points, and the last one, one point. The total points for each ratio category were then computedto arrive at an overall basis for analysis. Results showed that in terms of liquidity, FEU ranked first, followed by Malayan, then CEU; in terms of activity, FEU ranked first, followed by CEU, then Malayan; in terms of leverage, Malayan ranked first, followed by CEU, then FEU; in terms of profitability, FEU ranked first, followed by Malayan, then CEU; and in terms of market value, CEU and FEU tied for first and then Malayan followed. Overall, FEU (44 points) ranked first, followed by Malayan (40 points), then CEU (36 points).

Jane Frecknall-Hughes, Mike Simpson# and Jo Pad more (2007) have done research on Inherent limitations in using financial ratio analysis to assess small and mediumsized company performance in their research they critically evaluates the limitation of using financial ratios to judge the performance of large and medium size enterprise(SMSE) .the main objective of their research is to notify the small business research community of the shortcomings of the such an approach to measuring the performance of (SMSE).Their findings shows that Return on Capital Employed (ROCE) was found to be a particularly poor indicator of performance in SMEs and may be defined in many different ways giving rise to widely differing values of ROCE. In addition, the value of ROCE is open to some manipulation by management and analysts.

CHAPTER # 33.0 RESEARCH METHODOLOGY3.1 RESEARCH TYPEResearch are made of different reasons.the different procedure are used by researcher for achievement of their research.some of the procedure are field work,applied research,action research and bookish research .this research is applied research on CCCL.Therefore the type of this research is applied research.

3.2 VARIABLESVariables used in this research are profitability.leverage and liquidity.3.3 DATA COLLECTIONThe balance sheet and income statement of CCCL from 2007 to 2011 will be used for analysis. For this purpose, annual reports of CCCL will be taken from the official website of CCCL.3.4 TOOLS FOR DATA ANALYSISIn order to assess the performance of Cherat Cement Company, ratio analysis would be used first. In ratio analysis, profitability ratios, liquidity ratios, asset activity ratios, debt ratios and market strength ratios will be calculated to assess the profitability, liquidity, assets utilization efficiency, leverage position and market strength of the company. Secondly, trend analysis will be used to see the trend in all the entries of balance sheet and income statement over five years. Then lastly, common-size analysis will be used to check the weight of each and every entry of balance sheet out of total assets and in income statements, out of total sales.Microsoft Excel will be used for calculation purpose.

CHAPTER # 44.0 FINANCIAL STATEMENT ANALYSIS:4.1 RATIO ANALYSIS:Ratio analysis is an expression of a mathematical relationship between one to another. This analysis discloses such conditions which cannot be noted by analyzing individual components of the ratio.A) LIQUIDITY RATIOS: CURRENT RATIO: Current Ratio = Current assets / current liabilities

YEARS:2007200820092010 2011Q.R:1.551.011.260.77 0.95The current assets are also called liquid assets or working capital. Organizations maintain working capital to finance their current liabilities. So in current ratio, we assess the liquidity position of the company. The current ratio of CCCL does not seem to be good enough. As we can see that in 2007, it is 1.55 and we can say that the current assets of CCCL are sufficient to pay its current liabilities. Since it has no issue of liquidity in 2007 but in the succeeding years, the ratio is decreasing especially in 2010 and 2011, the ratio is 0.77 and 0.95 respectively. Hence CCCL cannot pay its current liabilities through its current assets. So it has prominent liquidity issues in the years 2008, 2009, 2010 and 2011.

QUICK RATIO: Quick ratio= current assets Inventory Current LiabilitiesYEARS:20072008200920102011Q.R:0.640.090.070.030.04Quick ratio tells us about the more accurate liquidity because it subtracts the inventory from current assets. As we saw that the current ratio of CCCL was not satisfactory so it is obvious that quick ratio will also be discouraging. So we can see that quick ratio is less than 1 throughout the period and even it is close to zero in succeeding years after 2007. Which means that after subtracting the inventory from its current assets, CCCL is not able to finance its current liabilities and hence faces a big problem of liquidity in the period?

B) LEVERAGE RATIO: DEBT-TO-TOTAL ASSETS RATIO:Debt-to-Total assets ratio = Total debt/total assetsYEARS:20072008200920102011D.T.A.R0.960.750.8170.6020.708This ratio tells us about how much debt financing is there in total assets of the firm. By calculating the debt ratio of CCCL, it can be seen that it has a huge debt financing in its total assets especially in 2007. This much high debt ratio is not a good sign for the company because it can lead the company to bankruptcy. So it should try to minimize debt financing as much as possible.

DEBT TO EQUITY RATIO:Debt to equity ratio: total debt/total shareholders equity.YEARS:20072008200920102011D.T.E.R:0.571.031.091.161.30The ratio has decreased due to increase in debt and decrease in equity .it shows that most of the CCCL financing provided by debt not by shareholders.

TIMES INTEREST EARNED RATIO:TIME INTEREST EARNED: EBIT / total interest chargedYEARS:20072008200920102011T.I.E.R:10.57101.3322.1522.03134.26It is used to asses a company ability to service the interest on its debt with operating income from the current period. In this ratio we have to specify how much EBIT Company has so to pay down the interest.

C) PROFITABILITY RATIO:GROSS PROFIT MARGINGross profit margin= Sales CGS / SalesYEARS:20072008200920102011GPM:10.9%4.62%14.68%2.57% 13.35%There is decreased in gross profit margin in 2008 and 2010 due to increase in cost of goods sold which is unfavorable .however in 2009 and 2011 it is favorable.

OPERATING EXPENSES:Operating Expenses = EBIT / Sales * 100

YEARS 20072008200920102011 OE 2.192.1012.5034.636.749

NET PROFIT MARGIN:Net Profit Margin= Net profit/ Sales * 100YEARS:20072008200920102011NPM:4.92% 1.06%5.25%7.83%0.2 5%Net profit margin increase in 2009 and 2010 which shows favorable condition. However in 2008 and 2011 it is decrease.

RETURN ON EQUITY:Return on equity: Net profit/ shareholders equityYEARS:20072008200920102011ROE:11.36-2.5711.61-13.182.41IT measures a firm's efficiency at generating profits from every unit of shareholders' equity. It shows how well a company uses its resources to generate earnings growth. The ROE is useful for comparing the profitability of a company to that of other firms in the same industry. So there is increased in ratio of return on equity in 2009 which shows that increased in net income as well as sales. However the value is decreased in 2008, 2010 and 2011.

RETURN ON ASSETS: Return on Assets= Net profit/ total assetsYEARS:20072008200920102011R.O.A:6.91-1.435.636.201.08This is an indicator that reflects how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. This is calculated by dividing a company's annual earnings by its total assets. The higher the ROA, the better, because the company earns more money on less investment. So there is increased in ratio in 2009 and 2010 that shows that the CCCL will manage its resources efficiently and effectively, however in 2008 and 2011 it is decreased.

D) ACTIVITY RATIO:TOTAL ASSETS TURNOVERTotal assets turnover: Sales/Total assetsYEARS:20072008200920102011TATO:0.980.890.960.710.79The ratio decreased because of decreased in sales in relation to assets this shows that the company is not efficient in using its assets to generate sales.

FIXED ASSETS TURNOVERFixed assets turnover= Sales/ Fixed assetsYEARS:20072008200920102011F.A.T1.561.531.340.950.06The ratio is continuously decreasing from 2007-2011 it shows that fixed assets are increasing while sales are decreasing. The decrease in ratio is either due to increase in fixed assets or due to decrease in sales which is not favorable condition for CCCL.

INVENTORY TURNOVERInventory turnover= sales / Inventory of finished goodsYEARS:20072008200920102011ITO:29.4018.7016.2817.2411.23A ratio showing how many times a company's inventory is sold and replaced over a period. This ratio is decreased due to increase in inventory which has higher the cost of goods sold there is slightly decreased in value which shows that the CCCL is not effective towards the liquidity.

E.MARKET VALUE RATIO:EARNING PER SHARE: Earning per share = Net profit / Number of ShareYEARS:20072008200920102011EPS:1.78-0.752.51-3.380.12The earnings per share is increased in 2009 because the income is increased .This increased in earning per share and also increased the return on common equity ,however in 2008 ,2010,2011 there is decreased in earning per share which positively affect the trust of the investors towards the CCCL.

TREND ANALYSIS

Trend analysis indicates in which direction a company is headed. Trend percentages are computed by taking a base year and assigning its figures as a value of 100. FiguresGenerated in subsequent years are expressed as percentages of base-year numbers.Trend percentages show horizontally the degree of increase or decrease, but they do notIndicate the reason for the changes. They do serve to indicate unfavorable developmentsThat will require further investigation and analysis. A significant change may have been caused by a change in the application of an accounting principle.

TREND ANALYSIS OF BALANCE SHEET 2007 2008 2009 2010 2011 A.Non-Current Assets (A1+A3+A5+A6+A7) 100114.7966134.8146106.4074100.8243

1.Capital work in progress 100001.439013655.2914

2.Operating fixed assets at cost 100110.871998.0526128.374101.7338

3.Operating fixed assets after D.A.D 100114.797588.63043153.501895.93687

4.Depreciation for the year 10074.72357110.8617111.8402119.3228

5.Intangible assets 100 00340.3571105.7663

6.Long term investments 10000106.9615130.1915

7.Other non-current assets 10000137.7819265.908

B.Current Assets (B1+B2+B3+B4+B5) 100139.198872.2184392.2625138.5703

1.Cash & bank balance 10086.8267392.6139688.40482131.7528

2.Inventories 100176.9073135.22971.70157187.8133

3.Trade Debt 100 0000

4.Short term investments 10021.905410.14715974.50980

5.Other current assets 100222.421467.554798.25649128.8952

C.Current Liabilities (C1+C2) 100214.56558.09043151.4864110.9409

1.Short term Secured loans 100218.7325100.828166.1008114.2546

2.Other current liabilities 100212.246433.58588126.3321103.4399

D.Non-Current Liabilities (D1+D2+D3+D4+D5) 100 86.97143369.017670.43861124.7308

1.Long term secured loans 1000089.78391125.0352

2.Long term unsecured loans 1000000

3.Debentures/TFCs 1000000

4.Employees benefit obligations 1000000

5.Other non-current liabilities 100801.052683.209463.991321101.2107

E.Shareholders Equity (E1+E2+E3) 100 96.49082105.110999.0108103.8201

1.Issued, Subscribed & Paid up capital 100100100100100

i).Ordinary Shares 100100100100100

ii).Preference shares 1000000

2 Reserves 10093.87207109.173998.2905106.6502

i).Capital Reserve 10000000

ii).Revenue Reserve 100 O098.2905106.65020

3.Surplus on revaluation of fixed assets 10000000

TREND ANALYSIS OF INCOME STATEMENT

2007 2008 2009 2010 2011

1.Sales 10011.253341176.85575.95359122.3371

i).Local sales (Net) 100104.0475109.698961.32944135.8449

ii).Export Sales (Net) 100140.1967137.0074104.2821106.9485

2.Cost of sales 100120.53105.268886.73963108.7937

i).Cost of material 1000096.07394112.9917

other input cost 100 011.21023757.9792107.8945

3.Gross Profit 10047.50678377.202713.17657635.6673

4.General, administrative and other expenses 100101.3322177.160178.912081002.408

i).Selling & distribution expenses 10000135.722496.95304

ii).Administrative and other expenses 100101.3322122.51753.57445103.9557

5.Salaries, wages and employee benefits 10000103.3837328.1108

6.Financial expenses 100 108.0033140.1846140.7146178.0228

of which: (i) Interest expenses 10000140.7146178.0228

7.Net profit before tax 10022.87118454.7648115.749218.55964

8.Tax expense (current year) 10019.56705111.845151.2231173.0994

9.Total amount of dividend 1000000

10.Total value of bonus shares issued 1000000

11.Cash flows from operations 100 0056.54878122.4556

G.Miscellaneous 1000000

1.Total capital employed (E+D) 10094.93338144.666688.0868110.2132

2.Total fixed liabilities (D1+D3) 1000089.78391125.0352

3.Retention in business (F7-F8-F9) 10096.35407335.2981134.52573.406941

4.Contractual Liabilities (G2+C1) 100218.7325262.6887119.0767119.2632

MNMN

Non-current assets shows downward trend in 2008, 2010 and 2011 however it slightly shows upward trend in 2009 which shows increase in non-current assets.Current-assets shows decrease in 2009 and 2010 however it slightly increase in 2011 but it shows upward trend in 2008 as compared to other years.Current liabilities are greater in 2008 the value lowered down in 2009 and 2010 however in 2011 it shows slightly increase. Current assets increase due to increase in short term investments, inventories and other current assets.Non-current liabilities shows upward trend in 2009. It is on its minimum point in 2008 however in 2010 and 2011 it decreases as compared to 2009. Increase in non-current liabilities is due increase in long-term loan and vice versa.Shareholders equity shows upward trend in 2010 and 2011 it is minimum in 2009 which shows greater contribution of shareholders. Sales of CCL are at zero in 2008 however in 2009 there appears greater increase in 2009. In 2010 the sales decreases as compared to 2009 but in 2011 sales shows slight increase as compared to that of 2010. Cost of sales is greater 2008 however it is on its minimum point 2010. In 2009 and 2011 it is greater as compared to 2010 while lower as compared to 2008. Increase in cost of sales is due to increase in cost of material.Gross profit increases in 2009, it decreases in 2008 and 2010 however it is on its peak point in 2011. The increase in gross profit is due to decrease in cost of goods sold or we can say general and administrative expenses. It is on its peak in 2011 but in 2008, 2009 and 2011 the value is lower as compared to 2011. The increase is due to in selling and administrative expenses.Financial expense increases from 2009 to 2011.financial expense consist of interest expense as well as general expenses therefore financial expenses increase due to increase in interest expenses.Net profit before tax is greater in 2009, 2010 however it decrease in 2008 and 2011 due to increase in other expenses without tax. The tax expense is lower in 2008 however it increases from 2009 ton 2011. Cash flow from operation due to at zero in 2008, 2009 however it increases from 2010 to 2011.

Common size analysis tells us how much percentage every item in balance sheet is of total assets and in income statement we take every element as percentage of sales.In our common size balance sheet non-current assets increase from previous period and most definitely this increase occur due to increase in operating fixed assets at cost, operating fixes assets after DAD depreciation for the year and other long term investment.While our current assets increase in 2008 and 2011.It decrease in 2007, 2009 and in 2010 .The decrease had occurred due to decrease in cash and bank balance short term investment and other current assets.On the equity and liabilities sections we see that our current liabilities increases due to increase in short term loans and other current liabilities.Non-current liabilities had increases due to increase in long term loans and other non-current liabilities.Common size income statement shows increases trend in shareholder equity.In common size income statement gross profit increases in 2008, 2011 and the decrease in 2007, 2009 and 2010.Net profit before tax is on peak in 2008 but in 2010 there is a very small. However in 2009 and 2011 it decreases. The decrease is due to increase in net expenses.The tax expenses decrease from 2009 to 2011 it increases in 2009 which effect net profit.

CHAPTER 5CONCLUSIONS AND RECOMMENDATIONSCONCLUSION:Liquidity: It is very important for any company to have optimal level of current assets so that it can finance its current liabilities with its current assets. If it does not have enough current assets, the company may suffer from liquidity problem.As we can see from the calculations of current ratio and quick ratio, Cherat Cement Company is suffering from severe liquidity problems. If it does not control the problem, it may suffer financially as it would not be able to finance its current liabilities.Profitability: In order to stay in the market and perform safely and with growth, a company must maintain a sound profitability position. But in the case of CCCL, the gross profit margin ratio of the company is quite low in the years 2008 and 2010 which is alarming for the company. Similarly, the net profit margin of CCCL is pretty low in the years 2008 and 2011 which is again critical situation and if not controlled the problem permanently, it may result in reduced share price and low growth of the company. Return on assets of CCCL shows increase in 2009 and 2010 which shows efficiency of a company but in 2008 and 2011 in decreases unfavorably thus showing fluctuation in this ratio. In case of return on equity there decrease in 2009 which shows increase in net profit but the value decreases in 2008, 2009 and 2011. ROE is useful to show how well a company uses its resources to earning.Leverage ratio measure the degree of protection of suppliers of long-term funds. In case of CCCL the debt to total assets ratio shows a huge debt financing in its total assets especially in 2007 which is an alarming level of debt financing for the company but if we look at the times interest earned ration, the company can easily pay its interest expense through its operating profit. But still CCCL management should consider this thing because it can create problem in the future. Debt to equity ratio is increased from 2007 to 2011 which means that CCCL has increased debt financing and reduced equity financing over the period.In case of activity ratio, the company is not bad but the efficiency in asset utilization is decreasing since 2008 and onwards. It should try to regain its efficiency in asset utilization in order to be successful.RECOMMENDATION:1. Working capital management area is quite critical for a company and if not handled with care, could lead to severe issues. So CCCL should strictly consider its liquidity problems and hence, should try to increase its level of current assets which could at least finance current liabilities. 2. There are prominent fluctuations in profitability ratios which is not good for the market reputation of a company. So CCCL should try to bring consistency to its profitability.3. In case of leverage ratios, we saw that the company has heavily relied on debt financing rather than equity financing through the sample period which can be very harmful for the company in several ways. Heavy debt financing can lead to bankruptcy costs. It is not welcomed by the shareholders also because increased debt financing diluted their earnings. So it is recommended that the CCCL should reduce debt financing and increase reliance on equity financing.4. In case of activity ratios, CCCL was really good in utilizing its assets but it could not maintain its performance and the ratios dropped quickly from 2007 to 2011. So it is recommended that it should try to regain the efficiency of asset utilization and consistency in activity ratios.5. Regarding the market strength, CCCL in not been impressive over the sample period. The Earning per Share ratio is quite low and even negative in 2008 and 2010. It is strongly recommended that the management should work on their weaknesses, as discussed earlier, so that the Earnings Per Share ratio could be increased and ultimately the confidence of investors can be build.

REFRENCEC.Tugas, f. (2012). comparative analysis of financial ratio. philippines.Enekwe chinedu innocent, o. i. (2013). financial ratio analusis of profitibility in nigerian pharmaceutical industry. nigeria.jane frecknall-huges, m. s. (2007). inherent limitation in using financial ratio analysis to assess small and medium sized company. japan.Mary Fischer, T. P. (US). analysis of financial statement of US private colleges and universities.nissim, d. (2003). financial analysis of leverage. columbia.nissim, d. (2003). financial analysis of leverage. new york.Nissim, D. (2003). financial analysis of leverage.penmen, J. A. (1989). ratio analysis and euity.penmen, s. H. (2003). financial analysis and equity evaluation.roton, E. E. (1997). financial statement on local firms supply marketing.webb, M. k. (2010). financial rato analysis of commercial bank performance. south africa.Yee, C. (.-k. (2007). ratio analysis comparability between chinese and japanese firm. china.

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Sheet1A.Non-Current Assets (A1+A3+A5+A6+A7)62.17793312371.378153876696.2281970368102.3938741456103.237945158 1.Capital work in progress0028.95444832810.41665817612.7303251983 2.Operating fixed assets at cost129.3816066905143.4478327932140.6543365361180.5634706081183.6941521818 3.Operating fixed assets after D.A.D 62.177423691471.378153876663.262767628597.10945866793.163771965 4.Depreciation for the year6.69339295575.00154244565.54479466.2013068617.3995741155 5.Intangible assets000.16641430940.56640266810.5990628729 6.Long term investments003.23084325073.45575532814.4990988727 7.Other non-current assets000.61372352020.84559930632.2485164229B.Current Assets (B1+B2+B3+B4+B5)37.82206687752.647855434638.02145272935.079522221448.6097903634 1.Cash & bank balance2.13596162281.85458559161.71760510561.51844480822.0005932044 2.Inventories3.31945604035.87235909267.94113235315.693913315210.6939246359 3.Trade Debt0.06050914850000 4.Short term investments13.43277626052.94250498820.00433016830.0032263980 5.Other current assets18.873363804941.978405762228.35838510227.863937735.9152725231C.Current Liabilities (C1+C2)24.318507931652.179008589630.311007966945.917021570550.9407780487 1.Short term Secured loans8.693364653919.015212192419.17265484631.845907229236.3854209827 2.Other current liabilities15.625143277633.163796397211.13835312114.071312453414.555357066D.Non-Current Liabilities (D1+D2+D3+D4+D5)12.38201706610.768817128239.738831420627.991465328134.9139853601 1.Long term secured loans0030.778156706827.633816274234.5520061403 2.Long term unsecured loans00000 3.Debentures/TFCs00000 4.Employees benefit obligations00000 5.Other non-current liabilities1.344333281410.76881712828.96067471380.35764905390.3619792197E.Shareholders Equity (E1+E2+E3)63.299475002561.078183593564.199810378363.564711356265.9929721126 1.Issued, Subscribed & Paid up capital27.050844099827.050844099827.050844099827.050828788127.0508287881 i).Ordinary Shares27.050844099827.050844099827.050844099827.050828788127.0508287881 ii).Preference shares000002 Reserves36.248630902734.027339493737.148966278536.513882568238.9421433245 i).Capital Reserve00000 ii).Revenue Reserve0037.148966278536.513882568238.9421433245 3.Surplus on revaluation of fixed assets00000Total assets100100100100100 1.Sales100100100100100 i).Local sales (Net)76.5251616368707.545677307365.952884885153.254277536859.1343467933 ii).Export Sales (Net)23.4748383632292.455095683434.047115114997.429485536840.8656532067 2.Cost of sales89.0493513362953.771807999485.314168273597.429485536886.6435250255 i).Cost of material0085.314168273517.188294061515.875272649other input cost0844.10555960668.040598072180.241191475370.7682523765 3.Gross Profit10.950648663846.228964991314.81719723372.570514463213.3564749745 4.General, administrative and other expenses4.962592590744.68633326726.72694299986.988966337557.2663488697 i).Selling & distribution expenses002.07485250393.70757810862.9382831186 ii).Administrative and other expenses4.962592590744.68633326724.65209049593.28138822892.7883541246 5.Salaries, wages and employee benefits003.09941588334.218746531911.3147733664 6.Financial expenses2.190077540421.01916243883.79628713644.63856590356.7499621231 of which: (i) Interest expenses002.5037608854.63856590356.7499621231 7.Net profit before tax7.162731654214.55747572175.62535564478.57274385281.3005627462 8.Tax expense (current year)2.23687667123.88943141380.36964064310.73595223681.0413267267 9.Total amount of dividend2.7714132120000 10.Total value of bonus shares issued00000 11.Cash flows from operations006.77911700055.04717202765.0520628019G.Miscellaneous 1.Total capital employed (E+D)77.537287077654.106255298280.406987856893.251614030284.0101422971 2.Total fixed liabilities (D1+D3)0023.80999818528.145539303928.7662914947 3.Retention in business (F7-F8-F9)2.15444177118.446907135523.8099981859.30869608960.2592360195 4.Contractual Liabilities (G2+C1)8.9065356987173.117445626538.641974038260.581169066159.058993513

Sheet2

Sheet3