Atlas Battery Report Working

Atlas BatteryFINANCIAL RATIO

ANALYSIS

10/1/2011

Federal Urdu University of Arts, Science and Technology

Financial Ratio Analysis

Project Submitted To

The Department Of Commerce

In Candidacy For

BS & M.COM IV

Supervised BY:

Sir Shafi Azad

____________

Submitted by:

Group Members Roll No.

Muhammad Zahoor 80113

Madiha Wajahat 1005164

Sufia Erum 100517356

Kiran Shumaila 1005162

Fozia Shafi 1005155

Fareeha Irshad 1005156

Anma Younus 1005151

MISSION STATEMENT 4

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VISION 4

COMPANY INTRODUCTION: 4

SALIENT FEATURES 5

EARNING PER SHARE: 10

PRICE EARNING RATIO : 11

DIVIDEND YIELD: 12

BOOK VALUE PER SHARE (WITHOUT SURPLUS): 14

BOOK VALUE PER SHARE (WITH SURPLUS): 15

RETURN ON TOTAL ASSETS: 17

RETURN ON STOCKHOLDER EQUITY: (BEFORE TAX) 18

RETURN ON STOCK HOLDER EQUITY: (AFTER TAX) 20

EQUITY RATIO: (WITH SURPLUS) 21

DEBT RATIO: 22

PROFIT MARGIN (BEFORE TAX): 24

GROSS MARGIN: 25

DEBT TO EQUITY: 26

CURRENT RATIO: 28

INVENTORY TURNOVER: 30

QUICK RATIO: 32

TRADE DEBTOR TURNOVER: 33

TREND ANALYSIS OF ATLAS BATTERY 36

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Mission Statement

To achieve market leadership through technological edge, distinguished by quality service and customers’ satisfaction, emphasis on employee long term welfare and ensure adequate return to

shareholders. Be a good corporate citizen of the society and country through harmonized endeavor.

Vision

A leading group in all respects through effective use of resources, technology and good business practices, attracting and retaining high quality associates and developing them to their fullest potential, keeping customers in the highest esteem and giving attractive sustained returns to

shareholders.

Company Introduction:Atlas Battery Limited pioneered the manufacture of dry charged Hard Rubber batteries in Pakistan. Now the company manufactures a complete range of Polypropylene and hard rubber batteries which caters to the needs of passenger cars of varied capacities, trucks, tractors, heavy vehicles, construction and road building equipment, as well as host of stationary and industrial applications. Motorcycle batteries have also been added to this range. The company has always been at the vanguard of development in the automotive industry in Pakistan making great strides in the fields of research and development. The brand has, over the years, earned a solid reputation as a product of latest Japanese technology with consistently high levels of performance and reliability. The sustained and continued high level of quality is ensured by ABL’s Quality Department with its exacting standards and state-of-the-art lab facilities manned by highly trained professionals monitoring the quality of batteries being produced .The entire process is overseen by a Technical Advisor from Japan Storage Battery Company Limited stationed at Karachi. He is attached to the factory and monitors and guides the technical Division in ensuring and meeting the international standards of quality. The focal point of the company’s philosophy is customer satisfaction through continued product excellence. Atlas Battery Limited aims at maintaining its lead in technology with the help of its in-house research and development program, interfacing with Japan Storage Battery Company Limited. ABL’s technological superiority is matched by its vast national network of over 600 dealers and retail outlets ensuring availability and prompt delivery of its products. All our regional and zonal offices are equipped with service center and are staffed with trained to provide technical personnel to provide an efficient service backup. The technical personnel also regularly tour their sales and territories monitoring service needs, problem and trouble-shooting. Our associates are ably supported by a steady supply of instruments and equipment imported and supplied by us, to enable them to carry out testing and repairing services with prompt attention and efficient resolution of operational complaints.

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History:

2000 ISO- 9002 Certification

1999 2nd Plant Expansion with Automatic Assembly Line.

1998 Export of Automotive Batteries

1998 PSI Certification (Quality) Motor cycle Batteries

1996 Export of Motor cycles Batteries

1994 PSI certification (Quality) for Automotive Batteries

1986 Introduced PP Batteries

1984 Plant Expansion

1974 Motorcycle Battery Production Started

1969 Automotive Battery Production Started

1969 Technical Collaboration with Japan Storage battery Co. Ltd. Japan

1966 Established (Karachi- Pakistan)

Salient FeaturesVast experience of more than 30 years, having been incorporated in 1966 in collaboration with Japan Storage Battery Company Limited

Leading OEM & Motorcycle battery manufacturer in Pakistan.

Pioneer in Dry-Charge and Heavy Duty Batteries.

The only battery company in the industry having a joint venture with a foreign company (G.S. Yuasa Japan).

The first company to launch Maintenance Free batteries in Pakistan.

Equipped with sophisticated Laboratory having the latest equipment for testing the performance of battery and Spectrophotometer of testing metals engaged in manufacturing of lead acid batteries.

The key technical and management staffs are foreign qualified and trained.

First one to introduce UPS, CNG, Diesel & Rickshaw Batteries.

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Frequent visits by Japanese battery experts to ensure the international quality.Well-equipped In-house research & development facility.Automatic assembly plant.Obtained ISO-9002 Certificate for Quality Standard.Obtained World Quality Commitment Award, awarded by BID Madrid, Spain.Largest dealer and service network in Pakistan.The 2nd largest manufacturer of automotive batteries; therefore tries that much harder to beat the market leader in quality.

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Ratio AnalysisDefinition:

A tool used by individuals to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis.

Ratios are used by both internal and external analysts:

Internal uses

Planning Evaluation of management

External uses

Credit granting

Performance monitoring

Investment decisions

Making of policies

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Earning per share: The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability. When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period.Earnings per share are generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio.

It is calculated as:

Net IncomeEarning per share =

Share outstanding 354,502,000

Earning per share (2011) = = 35.21 10,069,312

222,533,000Earning per share (2010) = = 26.52 8,391,139





2006 2007 2008 2009 2010 2011Earning Per Share 07.81 14.38 15.28 25.42 26.52 35.21

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2006 2007 2008 2009 2010 20110

5

10

15

20

25

30

35

40

Earning Per Share

Earning Per Share

COMMENTS:

Earning per share is increasing regularly due to increase in earning. While Atlas’s earning per share is less than Exide-Pakistan. Excide earning per share is 39.14 while Atlas earning per share is 35.21.

Price Earning Ratio : A valuation ratio of a company's current share price compared to its per-share earnings.

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects. The P/E is sometimes referred to as the "multiple", because it shows how much investors are willing to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is willing to pay $20 for $1 of current earnings.It is important that investors note an important problem that arises with the P/E measure, and to avoid basing a decision on this measure alone. The denominator (earnings) is based on an accounting measure of earnings that is susceptible to forms of manipulation, making the quality of the P/E only as good as the quality of the underlying earnings number.

Market Price per SharePrice Earning Ratio =

Earning Per Share

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217.02Price Earning Ratio (2011) = = 6.2

35.21

181Price Earning Ratio (2010) = = 6.8

26.52

144Price Earning Ratio (2009) = = 5.7

25.42


15.28


14.39


7.81

2006 2007 2008 2009 2010 2011

Price Earning ratio 9.5 11.7 10.1 5.7 6.8 6.2

2006 2007 2008 2009 2010 20110

2

4

6

8

10

12

14

Price Earning Ratio

Price Earning Ratio

Comments:

Price Earnings ratio is decreasing from 2009, while it was higher in 2007. The reason of decreasing this ratio is the increase in Market Price per share. While Atlas battery price earnings ratio is higher than Exide-Pakistan.

Dividend Yield:A financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock.

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Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position - in other words, how much "bang for your buck" you are getting from dividends. Investors who require a minimum stream of cash flow from their investment portfolio can secure this cash flow by investing in stocks paying relatively high, stable dividend yields.

To better explain the concept, refer to this dividend yield example: If two companies both pay annual dividends of $1 per share, but ABC Company’s stock is trading at $20 while XYZ Company’s stock is trading at $40, then ABC has a dividend yield of 5% while XYZ is only yielding 2.5%. Thus, assuming all other factors are equivalent, an investor looking to supplement his or her income would likely prefer ABC's stock over that of XYZ.

Dividend per ShareDividend Yield = X 100

Market Price per Share

12Dividend Yield (2011) = x 100 = 5.5 %

217

12Dividend Yield (2010) = x 100 = 6.6 %

181

12Dividend Yield (2009) = x 100 = 8.3 %

144

7.5Dividend Yield (2008) = x 100 = 4.8 %

154.9

7.5Dividend Yield (2007) = x 100 = 4.5 %

167.8

4.5Dividend Yield (2006) = x 100 = 6.1 %

73.9

2006 2007 2008 2009 2010 2011Dividend Yield 6.1% 4.5% 4.8% 8.3% 6.6% 5.5%

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Comments:

Dividend Yield is higher in 2009, as 8.3 while in 2011it is 5.5%. Dividend yield has satisfactory position and it is higher than Exide-Pakistan which is 2.73%.

Book Value per Share (Without Surplus):A measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly.Should the company decide to dissolve, the book value per common indicates the dollar value remaining for common shareholders after all assets are liquidated and all debtors are paid.In simple terms it would be the amount of money that a holder of a common share would get if a company were to liquidate.

Common Stock Holder’s EquityBook Value per Share =

Number of Common Shares Outstanding

954,700,000Book Value per Share (2011) = = 94.8

10,069,312


8,391,094

531,546,000Book Value per Share (2009) = = 76

6,992,579

406,000,000

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2006 2007 2008 2009 2010 20110.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

Dividend Yield

Dividend Yield

Book Value per Share (2008) = = 58.1 6,992,579


6,080,504


5,287,395

2006 2007 2008 2009 2010 2011Book Value per Share(without surplus)

50 55.3 58.1 76 81.5 94.8

2006 2007 2008 2009 2010 20110

10

20

30

40

50

60

70

80

90

100

Book Value Per Share (without surplus)

Book Value Per Share (without surplus)

Comments:

Book Value per share of Atlas Battery has increased approx 92% from 2006 to 2011 (50-94.8). This increase in ratio is due to slow increment in share capital at the rate of average 6.7% from 2006 to 2011 and higher increment in retained earning at the average rate of 12% for 2006 to 2011. The change shows a satisfactory position of the company because of value maximization.

Book Value per Share (With Surplus):

Common Stock Holder’s EquityBook Value per Share =

Number of Common Shares Outstanding

112,850,000

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Book Value per Share (2011) = = 112 10,069,312


8,391,094


6,992,579


6,992,579


6,080,504


5,287,395

2006 2007 2008 2009 2010 2011Book Value per Share(with surplus)

50 55.3 83 100.9 102 112

2006 2007 2008 2009 2010 20110

20

40

60

80

100

120

Book Value Per Share (With Surplus)

Book Value Per Share (with surplus)

Comments:

Book Value per share of Atlas Battery has increased approx 124% from 2006 to 2011 (52-112). This is because of slow increment in share capital at the average rate of 6.7% and higher increment in retained earning average rate of 12% and specially increases in surplus and revolution of property, plant and equipment with the average rate of 12.3% from 2008 to 2011.

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Return on Total Assets: A ratio that measures a company's earnings before interest and taxes (EBIT) against it total net assets. The ratio is considered an indicator of how effectively a company is using its assets to generate earnings before contractual obligations must be paid.

The greater a company's earnings in proportion to its assets (and the greater the coefficient from this calculation), the more effectively that company is said to be using its assets. To calculate ROTA, you must obtain the net income figure from a company's income statement, and then add back interest and/or taxes that were paid during the year. The resulting number will reveal the company's EBIT. The EBIT number should then be divided by the company's total net assets (total assets less depreciation and any allowances for bad debts) to reveal the earnings that company has generated for each dollar of assets on its books.

Net Income + Interest ExpenseReturn on Total Assets = X 100

Average Total Assets

525,100,000Return on Total Assets (2011) = X 100 = 29.2%

1,797,250,000


1,370,185,500


1,188,343,500


939,479,000


642,759,500

84,101,000Return on Total Assets (2006) = X 100 = 16%

526,413,000

2006 2007 2008 2009 2010 2011Return on Total Assets 16% 42.4% 21.9% 26.6% 26.3% 29.2%

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2006 2007 2008 2009 2010 20110.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

Return on Total Assets

Return on Total Assets

Comments:

Return on Stockholder Equity: (Before Tax) The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. Net income is for the full fiscal year (before dividends paid to common stock holders but after dividends to preferred stock.) Shareholder's equity does not include preferred shares.The ROE is useful for comparing the profitability of a company to that of other firms in the same industry.

There are several variations on the formula that investors may use:

1. Investors wishing to see the return on common equity may modify the formula above by subtracting preferred dividends from net income and subtracting preferred equity from shareholders' equity, giving the following: return on common equity (ROCE) = net income - preferred dividends / common equity.

2. Return on equity may also be calculated by dividing net income by average shareholders' equity. Average shareholders' equity is calculated by adding the shareholders' equity at the beginning of a period to the shareholders' equity at period's end and dividing the result by two.

3. Investors may also calculate the change in ROE for a period by first using the shareholders' equity figure from the beginning of a period as a denominator to determine the beginning ROE. Then, the end-of-period shareholders' equity can be used as the denominator to determine the ending ROE. Calculating both beginning and ending ROEs allows an investor to determine the change in profitability over the period.

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Net Income + Preferred DividendReturn on Stockholder Equity = X 100

Average Common Stock Holder’s Equity

525,101,000Return on Shareholder Equity (2011) = X 100 = 55%

954,745,000

341,288,000Return on Shareholder Equity (2010) = X 100 = 49.9%

684,154,000


531,546,000


406,312,000


335,998,000


246,350,000

2006 2007 2008 2009 2010 2011Return on Share Holder Equity(Before Tax)

25.1% 36.4% 40.4% 51.3% 49.9% 55%

2006 2007 2008 2009 2010 20110.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

Return on Share Holder Equity(Before Tax)

Return on Share Holder Equity(Before Tax)

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Comments:

Return on share holder’s equity ratio has increased from 2006 to 2011. Atlas Battery income is increasing every year which cause of increasing in the ratio. Net Income before tax has increased 693% from 2006 to 2011.

Return ratio is 55% in 2011 which shows a good return on equity.

Return on Stock Holder Equity: (After Tax) Net Income + Preferred Dividend

Return on Stock Holder Equity = X 100 Average Common Stock Holder’s Equity

354,502,000Return on Share Holder Equity (2011) = X 100 = 37.13%

954,745,000


684,154,000


531,546,000


406,312,000


335,998,000


246,350,000

2006 2007 2008 2009 2010 2011Return on Share Holder Equity(After Tax)

15.6% 26.0% 26.3% 33.4% 32.5% 37.13%

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2006 2007 2008 2009 2010 20110.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

Return on Share Holder Equity(After Tax)

Return on Share Holder Equity(After Tax)

Comments:

Return on share holder’s equity ratio has increased from 2006 to 2011. Atlas Battery income is increasing every year which cause of increasing in the ratio. Net Income before tax has increased 693% from 2006 to 2011.

Return ratio is 55% in 2011 which shows a good return on equity.

Equity Ratio: (With Surplus) The equity ratio is a financial ratio indicating the relative proportion of equity used to finance a company's assets. The two components are often taken from the firm's balance sheet or statement of financial position (so-called book value), but the ratio may also be calculated using market values for both, if the company's equities are publicly traded.

Total Stock Holder Equity Equity Ratio = X 100

Total Assets

1,128,500,000 Equity Ratio (2011) = X 100 = 54.2%

2,080,600,000

857,940,000 Equity Ratio (2010) = X 100 = 56.7%

151,390,000

705,332,000 Equity Ratio (2009) = X 100 = 57.5%

1,226,431,000

580,098,000 Equity Ratio (2008) = X 100 = 50.4%

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http://en.wikipedia.org/wiki/Balance_sheet

http://en.wikipedia.org/wiki/Equity_(finance)

http://en.wikipedia.org/wiki/Financial_ratio

1,150,256,000

335,998,000 Equity Ratio (2007) = X 100 = 46.1%

728,702,000

264,350,000 Equity Ratio (2006) = X 100 = 47.5%

556,817,000

2006 2007 2008 2009 2010 2011Equity Ratio (with surplus) 47.5% 46.1% 50.4% 57.5% 56.7% 54.2%

2006 2007 2008 2009 2010 20110.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Equity Ratio (with surplus)

Equity Ratio (with surplus)

Comments:

Equity Ratio is satisfactory because Equity is more than 50% of total assets. This ratio is increased due to revaluation of fixed assets from 2008.

Debt Ratio: A ratio that indicates what proportion of debt a company has relative to it assets. The measure gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load.

A debt ratio of greater than 1 indicates that a company has more debt than assets mean while, a debt ratio of less than 1 indicates that a company has more assets than debt. Used in conjunction with other measures of financial health, the debt ratio can help investors determine a company's level of risk.

Total Liabilities Debt Ratio = X 100

Total Assets

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952,136,000 Debt Ratio (2011) = X 100 = 45.8%

2,080,600,000

656,000,000 Debt Ratio (2010) = X 100 = 43.3%

151,390,000

521,099,000 Debt Ratio (2009) = X 100 = 42.5%

1,226,431,000

570,158,000 Debt Ratio (2008) = X 100 = 49.6%

1,150,256,000

392,704,000 Debt Ratio (2007) = X 100 = 53.9%

728,702,000

292,467,000 Debt Ratio (2006) = X 100 = 52.5%

556,817,000

2006 2007 2008 2009 2010 2011

Debt Ratio 52.5%

53.9%

49.6%

42.5%

43.3%

45.8%

2006 2007 2008 2009 2010 20110.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

Debt Ratio

Debt Ratio

Comments:

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Debt ratio in 2006 and 2007was unfavorable, while now it is 45.8% in 2011. This shows a favorable condition of the company, because equity is more than debts. This is due to increase in assets of surplus on revaluation of property, plant and equipment.

Profit Margin (Before Tax): A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings.

Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors.Looking at the earnings of a company often doesn't tell the entire story. Increased earnings are good, but an increase does not mean that the profit margin of a company is improving. For instance, if a company has costs that have increased at a greater rate than sales, it leads to a lower profit margin. This is an indication that costs need to be under better control.

Net Income Profit Margin = X 100

Total Revenues

525,101,000Profit Margin (2011) = X 100 = 8.9%

5,868,260,000

341,288,000Profit Margin (2010) = X 100 = 8.5%

4,024,422,000

272,880,000Profit Margin (2009) = X 100 = 8.6%

3,156,807,000

164,131,000Profit Margin (2008) = X 100 = 6.2%

2,628,820,000

122,257,000Profit Margin (2007) = X 100 = 7.7%

1,585,648,000

66,224,000Profit Margin (2006) = X 100 = 5.6%

1,209,033,000

2006 2007 2008 2009 2010 2011Profit Margin (Before Tax) 5.6% 7.7% 6.2% 8.6% 8.5% 8.9%

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2006 2007 2008 2009 2010 20110.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

Profit Margin (Before Tax)

Profit Margin (Before Tax)

Comments:

Profit before tax of Atlas battery for 2011 is 8.9%, while it was 5.6% of revenue in 2006. This shows a regular growth in profit after tax. Sales are increasing regularly and expenditures also are increased approx in the same ratio.

Gross Margin: A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. The gross margin represents the percent of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold by a company. The higher the percentage, the more the company retains on each dollar of sales to service its other costs and obligations.

Gross Profit Gross Margin = X 100

Total Sales

860,839,000Gross Margin (2011) = X 100 = 14.5%

5,868,260,000

591,200,000Gross Margin (2010) = X 100 = 14.7%

4,024,422,000

530,067,000Gross Margin (2009) = X 100 = 16.8%

3,156,807,000

386,883,000Gross Margin (2008) = X 100 = 14.7%

2,628,820,000

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291,622,000Gross Margin (2007) = X 100 = 18.4%

1,585,648,000

189,063,000Gross Margin (2006) = X 100 = 15.6%

1,209,033,000

2006 2007 2008 2009 2010 2011Gross Margin 15.6% 18.4% 14.7% 16.8% 14.7% 14.5%

2006 2007 2008 2009 2010 20110.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

Gross Margin

Gross Margin

Comments:

Gross profit ratio is 14.5% which it was 15.6% in 2006. There is fluctuation in gross profit ratio in 2007 it is highest at 18.4% but decreasing after 2008 due to high cost of sales.Company should control its cost of sale to increase gross profit margin.

Debt to Equity: A measure of a company's financial leverage is calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets.A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing.The debt/equity ratio also depends on the industry in which the company operates. For example,

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capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0.5.

Total Liabilities Debt to Equity =

Total Share Holder’s Equity

952,136,000Debt to Equity (2011) = = 0.84

1,128,500,000

656,000,000Debt to Equity (2010) = = 0.76

857,940,000

521,099,000Debt to Equity (2009) = = 0.74

705,332,000

570,158,000Debt to Equity (2008) = = 0.98

580,098,000

392,704,000Debt to Equity (2007) = = 1.17

336,000,000

292,467,000Debt to Equity (2006) = = `1.11

264,400,000

2006 2007 2008 2009 2010 2011Debt to Equity 1.11 1.17 0.98 0.74 0.76 0.84

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2006 2007 2008 2009 2010 20110

0.2

0.4

0.6

0.8

1

1.2

1.4

Debt to Equity Ratio

Debt to Equity Ratio

Comments:Debt to Equity ratio shows a favorable condition in 2011. While during 2006 & 2007 it was showing worse condition. Again this ratio improved by surplus and revaluation of property, plant and equipment.

Current Ratio: A liquidity ratio that measures a company's ability to pay short-term obligation.

The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is definitely not a good sign.The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. Companies that have trouble getting paid on their receivables or have long inventory turnover can run into liquidity problems because they are unable to alleviate their obligations. Because business operations differ in each industry, it is always more useful to compare companies within the same industry. This ratio is similar to the acid-test ratio except that the acid-test ratio does not include inventory and pre-paid as assets that can be liquidated. The components of current ratio (current assets and current liabilities) can be used to derive working capital (difference between current assets and current liabilities). Working capital is frequently used to derive the working capital ratio, which is working capital as a ratio of sales.

Total Liabilities Current Ratio =

Total Assets 1,172,913,000

Current Ratio (2011) = = 1.4

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813,725,000

756,814,000 Current Ratio (2010) = = 1.4

544,754,000

588,698,000 Current Ratio (2009) = = 1.4

435,472,000

628,382,000 Current Ratio (2008) = = 1.2

508,335,000

413,695,000 Current Ratio (2007) = = 1.3

329,823,000

313,695,000 Current Ratio (2006) = = 1.6

201,950,000

2006 2007 2008 2009 2010 2011Current Ratio 1.6 1.3 1.2 1.4 1.4 1.4

2006 2007 2008 2009 2010 20110

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Current Ratio

Current Ratio

Comments:Current Ratio shows that company has the ability to pay off current liabilities but for better liquidity position company should increase this ratio up to 2 times of the current assets.

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Inventory Turnover: A ratio showing how many times a company's inventory is sold and replaced over a period.Although the first calculation is more frequently used, COGS (cost of goods sold) may be substituted because sales are recorded at market value, while inventories are usually recorded at cost. Also, average inventory may be used instead of the ending inventory level to minimize seasonal factors.This ratio should be compared against industry averages. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying.High inventory levels are unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble should prices begin to fall.

Cost of Goods Sold Inventory Turnover =

Average Inventory

5,007,421,000 Inventory Turnover (2011) = = 7.7 times

650,950,000

365Inventory Holding Period = = 47 days

7.7

501,363,000 Inventory Turnover (2010) = = 6.8 times

3,433,222,000365

Inventory Holding Period = = 53 days6.8

262,674,000 Inventory Turnover (2009) = = 6 times

436,178,000


6


370,271,500


6.1


271,786,000

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4.8


222,461,000


4.6

2006 2007 2008 2009 2010 2011Inventory TurnoverInventory Holding Period

4.680

4.877

6.160

661

6.853

7.747

2006 2007 2008 2009 2010 20110

1

2

3

4

5

6

7

8

9

Inventory Turnover

Inventory Turnover

2006 2007 2008 2009 2010 20110

10

20

30

40

50

60

70

80

90

Inventory Holding Days

Inventory Holding Days

Comments:

Atlas Battery inventory turnover in 2011 is 7.7 times, which shows that company sells and replaces its inventory 7.7 or approx 8 times over a period while inventory holding period shows days it takes

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to sell the inventory. Atlas Battery takes 47 days to sell inventory. This period was 80 days in 2006. It means company has improved its selling policy.

Quick Ratio: An indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The higher the quick ratio the better the position of the company.The quick ratio is more conservative than the current ratio, a more well-known liquidity measure, because it excludes inventory from current assets. Inventory is excluded because some companies have difficulty turning their inventory into cash. In the event that short-term obligations need to be paid off immediately, there are situations in which the current ratio would overestimate a company's short-term financial strength.

Total Inventory – Current Assets Quick Ratio =

Current Liabilities

425,000,000 Quick Ratio (2011) = = 0.5

813,700,000

202,800,000 Quick Ratio (2010) = = 0.4

544,754,000

139,900,000 Quick Ratio (2009) = = 0.3

435,472,000

204,700,000 Quick Ratio (2008) = = 0.4

508,335,000

91,800,000 Quick Ratio (2007) = = 0.3

329,823,000

86,400,000 Quick Ratio (2006) = = 0.4

201,950,000

2006 2007 2008 2009 2010 2011

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Quick Ratio 0.4 0.3 0.4 0.3 0.4 0.5

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2006 2007 2008 2009 2010 20110

0.1

0.2

0.3

0.4

0.5

0.6

Quick Ratio

Quick Ratio

Comments: Quick ratio in 2011 is 0.5 which shows that half of the current liabilities are immediately converttable to cash. This ratio is satisfactory and company has ability to pay 50% of current liabilities of it has to pay immediately.

Trade Debtor Turnover:The Debtors/Receivable Turnover ratio when calculated in terms of days is known as Average Collection Period or Debtors Collection Period Ratio.

The average collection period ratio represents the average number of days for which a firm has to wait before its debtors are converted into cash.

Net Credit Sales Trade Debtor Turnover =

Average Accounts Receivable

5,868,260,000Trade Debtor Turnover (2011) = = 61.8 times

95,010,500

365Trade Debt Period = = 6 days

61.8


94,458,500


42.6

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82,954,000365

Trade Debt Period = = 10 days38.1


64,610,500


40.7


48,849,000


32.5 1,209,033,000

Trade Debtor Turnover (2006) = = 28.3 times 42,700,000


28.3

2006 2007 2008 2009 2010 2011Trade Debtor TurnoverTrade Debt Period

28.313

32.5117

40.79

38.110

42.69

61.86

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2006 2007 2008 2009 2010 20110

10

20

30

40

50

60

70

Trade Debtor Turnover

Trade Debtor Turnover

2006 2007 2008 2009 2010 20110

2

4

6

8

10

12

14

Trade Debt Period

Trade Debt Period

Comments:

Trade debit turnover has increased in 2011 which decreased the trade debit period. This change shows that now company has improved collection policy of accounts receivable. In 2006 company takes 13 days to collect accounts receivable now in 2011 it takes 6 days to collect accounts receivable.

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Trend Analysis of Atlas Battery

2006 2007 2008 2009 2010 20110

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Sales

Sales(Rupees in '000')

2006 2007 2008 2009 2010 20110

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

Cost of Sales

Cost of Sales(Rupees in '000')

2006 2007 2008 2009 2010 20110

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

Gross Profit

Gross Profit(Rupees in '000')

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2006 2007 2008 2009 2010 20110

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Distribution Cost

Distribution Cost(Rupees in '000')

2006 2007 2008 2009 2010 20110

20,000

40,000

60,000

80,000

100,000

120,000

Administrative Cost

Administrative Cost(Rupees in '000')

2006 2007 2008 2009 2010 20110

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Other Operating Income

Other Operating Income(Rupees in '000')

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2006 2007 2008 2009 2010 20110

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Other Operating Expenses

Other Operating Expenses(Rupees in '000')

2006 2007 2008 2009 2010 20110

100,000

200,000

300,000

400,000

500,000

600,000

Profit from Operation

Profit from Operation(Rupees in '000')

2006 2007 2008 2009 2010 20110

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Finance Cost

Finance Cost(Rupees in '000')

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2006 2007 2008 2009 2010 20110

100,000

200,000

300,000

400,000

500,000

600,000

Profit Before Tax

Profit Before Tax(Rupees in '000')

2006 2007 2008 2009 2010 20110

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Taxation

Taxation(Rupees in '000')

2006 2007 2008 2009 2010 20110

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Profit After Tax

Profit After Tax(Rupees in '000')

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1. Comparison of ATLAS BATTERY LIMITED and Exide Battery

Short Term Analysis:

In short term analysis Exide has performed better than the Atlas Ltd. By analyzing all three ratios it is clear that Exide battery Pakistan has more capability to pay off its current liability.

Profitability Analysis:

By analyzing profitability ratios it can be seen that Atlas battery are earning more profits than the Exide Pakistan. Although sales of Exide are high but there cost of sales is also high which affects its profits where as Atlas Battery has control over its cost.

Long Term Analysis:

Both companies are not fully utilizing their assets to contribute into sales. But in 2009 Exide step ahead in both ratios which results in increase sales.

DEBT ANALYSIS:

By comparing both companies we see that the proportion of equity in total capital is high in Atlas than Exide. As far as debt to equity is concerned Exide has more debt against $1 equity, which means in comparison atlas is somehow in a better position and less chances of liquidation.

2. Sector Comparison:

Sector Average Atlas Exide2009 2009 2009

Current Ratio 1.315774

1.300917

1.330632

Quick Ratio 0.311664

0.230585

0.392742

Cash Ratio 0.14435 0.05674 0.23196Fixed Assets Turnover Ratio

6.675601

4.969049

8.382154

Total Assets Turnover Ratio

2.59632 2.428022

2.764618

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Net Profit Ratio 3.863919

5.63% 2.10%

Gross Profit Ratio 13.90654

16.79% 11.02%

Operating Margin Ratio 7.360738

10.02% 4.70%

Debt to Capital Ratio 0.295911

0.163133

0.428689

Debt to Equity Ratio 0.472646

0.194933

0.75036

Analysis:

In comparison with sector Exide’s short and long term position is better and for Atlas profitability and debt ratios are better, but overall the industry is not performing well due to economic downturn. The poor state of the industry is reflected in Business Monitor International (BMI)’s Business Environment Rating for the automotive industry in Asia Pacific, where Pakistan is in last place on a score of 42.4 out of a possible 100. The market is held back by low production growth potential and an average rating for sales growth. However, as a signatory to the Trade Related Intellectual Property Rights Agreement (TRIPS) under the auspices of the World Trade Organization (WTO), the country’s regulatory environment scores well. A number of free trade agreements also contribute to this criterion, although forming FTAs with non-Asian countries would improve this rating further. Despite low marks for bureaucracy and corruption, the market does score well for its long-term economic risk and policy continuity.

According to Daily Times, as many as 60,000 workers and staffers in Pakistan's auto sector have lost their jobs from July, 2008 to January, 2009 due to falling demand for cars. More jobs cuts are feared with continuing weakness in demand. But as the current financial crisis ebbs, there will be significant pent-up demand for automobiles in Pakistan that will drive the growth in auto industry.

3. Vertical Analysis of Balance Sheet

ATLAS BATTERY LIMITED:

As we know that Atlas Battery Limited is a leading manufacturing company and marketing in Pakistan. Let see how they progressed in perspective of all their Assets and liabilities over the five years.The number of shares issued last two year 2009 and 2008 was same before which they were different. The company after 2005 raised some share capital to raise fund as their value was Going Up. The amount of taxation also was being reduced which seems that the company started paying off their tax instead to defer it to the next upcoming years.The trade and other payables increased by a huge amount in percentage from year 2005 which tells the company increased the liabilities in greater proportion of percentage over the last five years.

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The short term borrowing was also been seen but they did not increased that much as the trade and other payables and remained consistent over the years.

Since the company position starts getting better from year 2006 the Fixed assets section increased in huge amount which tells us that the company really invested in the buying of the fixed assets for much better capacity and storage so they can improve and increase their production.The current assets section as it is clear that the stores, spares and loose tools and stock in trade were almost just enough as much they needed. It seems that the company is utilizing their inventory as much they needed.The current assets section was in the greater proportion as compared to rest of assets that how well the company not in the long term but also in short term is keeping it better in the market and improved their position over the last few years.

4. Horizontal Analysis of Balance Sheet The company increased their share capital in the year 2005 and it is still the same until now. Because of this the company’s issued, subscribed and fully paid section also increased. The company’s noncurrent liabilities increased in huge amount from year 2007 and in year 2008. The Long provision taxation also increased by a huge amount in percentage over the last two to three years as compared to last five years.The trade and other payable section also increased by a huge amount especially from year 2007 so the company increased most of their liabilities in this section. The company also increased the short term borrowing amount by a much greater percentage from year 2005 until now which tells the company really increased most of their liabilities in this particular section.So overall the taxation, total liabilities and equity section increased in much greater percentage from year 2006 and until now which tells how much the company increased their liabilities.

The fixed assets section increased by a very greater proportion in percentage as the company’s position started getting better from year 2007 until now. The percentage increase in the fixed assets was very huge which tells how much the company has invested to buy more fixed assets to increase their production and sales.So over the last five years we see how much the Atlas Battery Limited has improved in perspective of all kinds of noncurrent and especially current assets and how better they are managing it.

5. Vertical Analysis of Income Statement As we seen the company’s strengthens from year 2006 it improved in all kinds of section. If we talk about their sales are increasing a lot year after years. So because of this the cost of goods sold also increased in much greater amount The company also improved year after year in the gross profit section as well which better tells the company how much they improved over the past few years and the big reason for that in not only better sales but also a decline in cost of sales percentage.The company maintained its distribution cost from 2005 to 2008 which were around 4 to 6 percent.As the company improved in increasing sales and decreasing their cost of sales and maintain their distribution cost they also made a healthier operating profit over the last few years.So because all these reason the company improved in maintain their before tax and after tax profit to a much better position.

6. Horizontal Analysis of Income Statement

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As we know the Atlas Battery Limited position started getting stronger and stronger from year 2007 they improved in almost all kinds of sections in which they can earn profit increase their sales and make more money by every ways by buying assets.Since the company bought lot of fixed assets that definitely have improved their production capacity and this was definitely due to much bigger demand and supply. So the company really improved in much greater proportion in increasing their sales from year 2007 and continued their progress until now. As the increase in the sales we know the cost of sales also increased so the amount of cost of sales was also quiet high but the company did make some efforts in year 2007 to reduce its cost of sales in order to make much more profit. Since the increase in sales much in greater proportion as compare to cost of sales the company’s gross profit also rose year after year.With all the increase in the sales and cost of sales the distribution cost also rose with greater proportion as compare to last eight years. Due to all the steps taken by the company to reduce their expenses with the increase in the sales that company also made a huge amount of operating profit which better tells the company’s position that how better they are getting year after year. This progress tells us also one more thing that the company will really earn a lot of profit with increased sales the future as well.Other expense also rose with the increase in the sales and as compared to the country’s condition this up and down will continue in upcoming years so the company should be aware of it and should have primitive measures for it. The before tax profit was also high year after year from year 2007 and still rising over the last three years.

The taxation amount also rose especially in the year 2009 due to the increased taxes but the company’s good progress is not affected by it.The Atlas Battery Limited net profit after taxation also rose to much greater proportion over all the last three years but raised much in year 2009 as compare to the last few years due to the increased demand and supply.

7. Vertical Analysis of Balance Sheet

EXIDE BATTERY LIMITED:Vertical Analysis of the balance sheets shows that Current liabilities of the company increase from last years. On the other side of balance sheet Current assets of the Co slightly increase from 2006. The amount of taxation has been constant from 0 to 1 percent that the company started paying off their tax. The trade and other payables also remain constant percentage last two year which tells the company increased the liabilities in greater proportion of percentage.the company Fixed assets section does not increased in much amount which tells us that the company is not much investing in the buying of the fixed assets for much better capacity and storage so they can improve and increase their production. As far as current assets section as it is clear that stock in trade has been increased in great proportion of percentage from 2005 to 2009. It seems that the company is utilizing their inventory as much they needed. The current assets section was in the greater proportion as compared to rest of assets that how well the company not in the long term but also in short term is keeping it better in the market and improved their position over the last few years.

8. Horizontal Analysis of Balance Sheet:

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Liabilities and owner equity of the balance sheet shows that issued and paid up capital of the company has been constant from year to year 2005 to 2009. Accumulated profits of the company have been in increasing trend. Noncurrent liabilities of the company increases from 2005 to 2008 but there is a decline in 2009. Current liabilities of the company also have increasing trend.This horizontal analysis of balance sheet shows that Fixed Assets of the Company increase from last two years. It means Company has much productive assets. It shows a good trend of fixed assets. Company also invests in long term investment and this asset also has increasing trend from 2005 to 2008 but in percentage went down with huge margin. Company also has long term deposits and these also have increasing trend.Current Assets of the Company also have increased in last two year. Trade debts of the Company also have increasing trend and its debts are not in a good position.

9. Vertical Analysis of Income Statement In vertical analysis of income statement shows that has high cost of goods sold from last two years. Gross Profit of the Company has decreasing trend from last two year. This is decrease due to high cost of goods sold. Operating expense of the company has minimum portion in the income statement. Profit from operations also has decreasing trend in 2009 from 6.30% to 4.70%. Provision for income taxes also has decreasing trend.

10.Horizontal Analysis of Income Statement:

Horizontal analysis of income statement shows that net sales of the Company has increasing trend. But on the other hand Cost of goods sold jump quickly in 2009 from sales. This is not a good trend. Distribution costs has been increased in 2009 from 2008 i.e. 127.53% to 256.44%. Other operating expenses of the Company are increasing quickly in 2009 than 2008 i.e. from 191.20% to 496.18%. Company is also increasing trend in other operating income but 2009 it has decrease in huge proportion of percentage. Co also has high finance cost from last years.

11.Du-Pont Analysis:

Du-Pont basis is Return on equity. There are three main components who measure the effectiveness of ROE.

Financial leverage Asset Turnover Profit margin

ATLAS BATTERY LIMITED

Atlas’ return on equity is 33% in 2009, which is greater than 2008 which were 26%. It depicts a high return on equity with little or no debt which enables it to grow without large capital expenditures, allowing the owners of the business to withdrawal cash and reinvest it elsewhere.

Net profit margin has increased in 2009 to 5.6%, which also effect the return on equity. Due to better working capital management and negotiation of lower markup rates with banks, finance cost increased marginally by 4.8%. Thus the company achieved profit before tax of Rs. 272.9 million for the year 2008-09 as against Rs. 164.1 million achieved during last year. After providing taxation of Rs. 95.2 million profit after tax stood at Rs. 177.7 million with growth of 66.4% as compared to

| 47

http://beginnersinvest.about.com/cs/financialratio/g/debttoequity.htm

previous year. The company earned Rs. 25.41 per share against Rs. 15.27 per share last year. Return on equity rose to 33.4% as against 26.4% last year.

Exide Battery:Exide Battery’s return on equity is 16% in 2009 which has only increased by 0.003929% from 2008. Exide’s has high leverage ratios which mean that company is relying on more debts than equity which is about 93% in 2008 which allows it to reduce the tax burden. In 2009 ROE has increased because cost of sales is very high. It shows the management’s weakness to control inventory. Finance cost has been increased from 2008 to 2009, which ultimately impact the return on equity.

Referances:

http://www.investopedia.com/terms/r/ratioanalysis.asp#ixzz1ZGV5RUJd http://www.investopedia.com/terms/c/cash-ratio.asp#ixzz1ZGalhknZ www. atlasbattery .com.pk/ www. exide .com/ http://www.pakalumni.com/profiles/blog/show?id=1119293%3ABlogPost%3A64556 http://www.smeda.org.pk www.investopedia.com

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http://www.investopedia.com/

http://www.smeda.org.pk/

http://www.pakalumni.com/profiles/blog/show?id=1119293%3ABlogPost%3A64556

http://www.exide.com/

http://www.atlasbattery.com.pk/

http://www.investopedia.com/terms/c/cash-ratio.asp#ixzz1ZGalhknZ

Atlas Battery Report Working

Documents

collect accounts

trade debtor

atlas battery

atlas battery

stock holder

balance sheet

total net

company started