Report Ibf Ptcl

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Ratio Analysis of PTCL

Financial Statement For Year2009-2010

By:

Khurram Iqbal

EMBA - SZABIST

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Acknowledgment

We are thankful to Almighty Allah who gave us thestrength to complete and fulfill this report, Secondly I

would like to thank and appreciate the efforts of Mr.

Ahmar Athar whos visionary guidance made this project

to be completed in time and with all the requirements.

Introduction:

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Pakistan Telecommunication Company Limited (PTCL) is proud to be

Pakistans most reliable and largest converged services carrier providing all

telecommunications services from basic voice telephony to data, internet, video-

conferencing and carrier services to consumers and businesses all over the

country.Whether it is an office in the largest city of Pakistan or a home in a small

village, we are present in every corner of Pakistan to serve our customers

Companys Profile:

PTCL is all set to redefine the established boundaries of the telecommunication

market and is shifting the productivity frontier to new heights. Today, for millionsof people, customer demand instant access to new products and ideas. More

importantly PTCLs aim is to provide better living standards with increased values

in this ever-shrinking globe of ours. PTCL is setting free the spirit of innovation

PTCLs aim is to be customers first choice in the future as well, just as it hasbeen over the past six decades for providing;

1. Business & Corporate Users.

2. Nationwide Infrastructure

3. National Long-haul Core Network

4. Carrier services

5. White Label Services

6. EVO Wireless Broadband

7. Fixed Broadband

8. IPTV Service (Smart TV)

9. Pak Internet Exchange

10.V-fone

11.International Networks

a. SEAMEWE-3 Submarine Cable System

b. SEAMEWE-4 Submarine Cable System

c. IMEWE Submarine Cable System

12. Satellite Communication

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Analysis:

Current Ratio in 2009 was increase very little in 2010. PTCL current assetswere decreased from 54 Million to 45 Million; however this decrease wassupplemented with decrease in current liabilities from 36 Million to 30 Millionwhich is overall a good sign for the company that this ratio has an increasingtrend.

In 2009, PTCL had to pay for Voluntary separation scheme where as in 2010 onwardsPTCL will not have to pay for this liability.

Overall Companys liquidity position is relatively good (1.51) since its liabilities arereduced as compared to last year (1.50).

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Analysis:

In 2009 PTCL was receiving its receivables in 24 days, in 2010 its averagesdays are 65 which is not a good sign for the company. It has tremendouslyincreased in these two years.

The increase in DSO indicates that customers, on the average, are not paying their

bills on time. This deprives PTCL of funds that it could use to invest in productiveassets. Moreover, in someinstances the fact that a customer is paying late may signal that the customer is infinancial trouble, in which case PTCL may have a hard time ever collecting thereceivable.

This would be strong evidence that steps should be taken to expedite the collectionof receivable.

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Analysis:

In 2009 Fixed Asset turnover ratio was 0.65 and reduced to 0.63 this meansPTCL is not using its fixed assets in a good manner. This ratio can be higher ifthey start using its fixed assets effectively.

The ration indicates that PTCL has used its revenue to purchase new assets howeverthe return on investment is not very good. So far as well as the churn on fixed line isresulting in low sales figures in 2010.

Another reason is that PTCL has recently invested to deploy new technologies likeIPTV, broadband DSL, VPTCL (WLL Network); these all account in increase of net fixedassets as compared to year 2009.

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Analysis:

In yesr 2010 PTCL paid PTA for WLL license fee. Furthermore PTCL paid Loan to the whollyowned subsidiary PTML (UFONE) as well. These two entities together was a big expense forPTCL because of which the cash in 2010 is reduced, which eventually resulted decrease in totalassets.

In 2010, PTCL also took more Long term loans and did less short term investments incomparison to year 2009 because of which total assets in year 2010 are less in from year2009.

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Analysis:

Debt Ratio of PTCL are reduced from 35.4 to 33.8 which indicates thatfinancial position of the company is good and they have paid off some portionof debt which they were having in 2009.

At the same time the analysis also shows that probably PTCL has used itstotal assets to pay off some of its debt.

In case PTCL needs some loan in the near future ten Creditors may be reluctant tolend the firm more money.

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Analysis:

The calculation depicts that there is a remarkable decrease in interest charges whichPTCL had to pay in year 2010 as compared to year 2009 because of which the Times

Interest Earned has increased twice.

PTCLs interest is covered 35.2 times. TIE ratio reinforces the conclusion from ouranalysis of the debt ratio that PTCL will not face difficulties if it attempted to borrowadditional funds.

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Analysis:

The result shows that the Net income of PTCL has increased from last year,

however there is reduction in total sales of the organization. There has beenreduction in the cost which PTCL had incurred in its operations. This showsthat PTCL is managing its operations efficiently as well.

In 2009, the Profit margin of PTCL was 15.44 whereas in 2010 it increased to16.25 which shows reduction of cost.

Analysis:

The result of Basic power ratio shows the raw earning power of the firms assets,

before the influence of taxes and leverage, and it is useful for comparing PTCL withdifferent tax situationsand different degrees of financial leverage.

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Because of its good turnover ratios and good profit margin on sales, PTCL is earninga good return on its assets .

In 2009, the basic earning power for PTCL was 9.10 whereas in 2010 itincreased to 9.475 which shows PTCL is using its assets effectively and

earning a good return on it as well.

Analysis:

The result shows that PTCL is getting good return on its total assets. This returnresults from PTCLs good basic earning power and low interest costs which resultedfrom its average use of debt, both of which cause its net income to be relatively high.

In 2009, PTCLs ROA was 5.94 whereas in 2010 it increased to 6.16 whichshows PTCL s Basic earning power and interest costs are good as comparedto last year.

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Analysis:

In 2009 PTCLs Return on common equity was 9.21 whereas in 2010 it increased to9.32. This ration indicates that companys financial position is good.

Stockholders invest to get a return on their money, and this ratio tells how well PTCL

is doing. From this ratio we can see that investors will be happy to invest in PTCLsstock shares.

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Analysis:

From the calculation we can see that PTCL has floated total shares of 5.1Million. In year 2010 PTCLs Net income increased from last year. Thisincrease in Net income resulted in increasing the earning power per sharefrom 1.79 in 2009 to 1.82 in 2010.

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Analysis:

P/E ratios are higher for firms with strong growth prospects, other things heldconstant, but they are lower for riskier firms.

In 2009, the P/E ratio for PTCL was 5.59 where as in 2010 it decreased to 5.49.Although there is a decrease in P/E ratio but the impact in not huge.

This indicates that the company is not riskier and it has growth prospects.

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