FINANCIAL MANAGMENT TOPIC: PROJECT ON Fauji Fertilizer Company & Engro Corporation limited
Financial Analysis of Engro
Oct 30, 2014
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FINANCIAL MANAGMENT
TOPIC: PROJECT ON Fauji Fertilizer Company & Engro Corporation limited
Contents
Acknowledgement.....................................................................................................2
Meaning of ratio analysis:.........................................................................................3
Types of ratio comparisons.......................................................................................3
Cross-sectional analysis......................................................................................4
Time -series analysis...........................................................................................4
Groups of financial ratios..........................................................................................4
FAUJI FERTILIZER CORPORATION (FFC).........................................................5
History.......................................................................................................................5
Awards of FFC..........................................................................................................5
Mission Statement.....................................................................................................6
Corporate Vision.......................................................................................................8
RATIO ANALYSIS..................................................................................................9
BALANCE SHEET.................................................................................................23
INCOME STATEMENT.........................................................................................25
ENGRO CORPORATION......................................................................................26
RATIO ANALYSIS...................................................................................................29
BALANCE SHEET.................................................................................................42
INCOME STATEMENT.........................................................................................44
Acknowledgement
We have the pearl of our eyes to admire blessing of the compassionate and omnipotent because
the words are bound, knowledge is limited and time is short to express His dignity. It is one of
the infinite blessings of almighty ALLAH that He bestowed us with potential and ability to
complete the present training and make a material contribution towards the deep oceans of
knowledge.
First we avail this opportunity to bow our head before ALLAH almighty in humility who given
us the wisdom and perseverance for completing this piece of report.
We invoke peace for Holy Prophet Muhammad (S.A.W.) who is forever torch. We feel highly
privilege to ascribe the most and ever burning flame of my gratitude and deep scene of devotion
to the Prof. Ali who taught us “Financial Management project” with heart and also
gave a guideline to this report.
Financial managers are always concerned with taking important decisions about the businesses
of their organization. They have to consider each and every transaction of their business in order
to keep track of changes in the equity. They have to present such a picture of their organization
as would facilitate investors to invest in the company.
Ratio analysis is one of the facilitative tools making the actual state of affairs of the business
more comprehensive and explicable for the investors and potential users of the books of accounts
of the company.
Throughout this semester, I am conducting the ratio analysis of Engro And Fauji Fertilizer. both
are pronounced companies of Pakistan. It is considered as the benchmark in power industry. In
this project, we will be focusing on a brief introduction of the company followed by its ratio
analysis.
In designing this project, the key source of information has been the financial statements of the
company. I have put up all my efforts in bringing out the true picture of both companies and
making this project a true replica of the actual state of affairs of the company.
MEANING OF RATIO ANALYSIS:
Ratio analysis is the method or process by which the relationship of items or group of
items in the financial statement are computed, determined and presented.
Ratio analysis is an attempt to derive quantitative measure or guides concerning the
financial health and profitability of business enterprises. Ratio analysis can be used both in trend
and static analysis. There are several ratios at the disposal of an analyst but their group of ratio
he would prefer depends on the purpose and the objective of analysis.
While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus
on a technique, which is easy to use. It can provide you with a valuable investment analysis tool.
This technique is called cross-sectional analysis. Cross-sectional analysis compares financial
ratios of several companies from the same industry. Ratio analysis can provide valuable
information about a company's financial health. A financial ratio measures a company's
performance in a specific area. For example, you could use a ratio of a company's debt to its
equity to measure a company's leverage. By comparing the leverage ratios of two companies,
you can determine which company uses greater debt in the conduct of its business. A company
whose leverage ratio is higher than a competitor's has more debt per equity. You can use this
information to make a judgment as to which company is a better investment risk.
However, you must be careful not to place too much importance on one ratio. You obtain a better
indication of the direction in which a company is moving when several ratios are taken as a
group.
Types of ratio comparisons
There are two major types of ratio comparisons:
Cross-sectional analysis
Time series analysis
Cross-sectional analysis
Cross-sectional analysis is the comparison of different firm’s financial ratios at the same point in
time; comparing the firm’s ratio to those firms in its industry or to industry averages. Frequently,
a firm will compare its ratio values to those of its key competitors of group of competitors that
firm wishes to evaluate.
Time -series analysis
Time series analysis is applied when a financial analyst evaluates performance overtime.
Comparison of current to past performance, using ratio analysis, allows the firm to determine
whether it is progressing as planned. Developing trends can be seen by using multi year
comparison and knowledge of these trends should assist the firm in planning future operations.
Groups of financial ratios
Liquidity ratios
Activity ratios
Debt analysis ratios
Profitability ratios
Marketability ratio
FAUJI FERTILIZER CORPORATION (FFC)
AWARDS OF FFC
Introduction
With a vision to acquire self - sufficiency in fertilizer production in the country, FFC was
incorporated in 1978 as a private limited company. This was a joint venture between Fauji
Foundation (a leading charitable trust in Pakistan) and Haldor Topsoe A/S of Denmark.
The initial share capital of the company was 813.9 Million Rupees. The present share capital of the company stands above Rs. 8.48 Billion. Additionally, FFC has more than Rs. 8.3 Billion as long term investments which include stakes in the subsidiaries FFBL, FFCEL and associate FCCL.
FFC commenced commercial production of urea in 1982 with annual capacity of 570,000 metric tons.
Through De-Bottle Necking (DBN) program, the production capacity of the existing plant increased to 695,000 metric tons per year.
Production capacity was enhanced by establishing a second plant in 1993 with annual capacity of 635,000 metric tons of urea.
FFC participated as a major shareholder in a new DAPS/Urea manufacturing complex with participation of major international/national institutions. The new company Fauji Fertilizer Bin Qasim Limited (formerly FFC-Jordan Fertilizer Company Limited) commenced commercial production with effect from January 01, 2000. The facility is designed with an annual capacity of 551,000 metric tons of urea and 445,500 metric tons of DAP, revamped to 670,000 metric tons of DAP.
In the year 2002, FFC acquired ex Pak Saudi Fertilizers Limited (PSFL) Urea Plant situated at Mirpur Mathelo, District Ghotki from National Fertilizer Corporation (NFC) through privatization process of the Government of Pakistan. It has annual production capacity of 574,000 metric tons urea which has been revamped to 718,000 metric tons urea in 2009.
This acquisition at Rs. 8,151 million represented the largest industrial sector transactions in Pakistan at that time.
Mission Statement
FFC is committed to play its leading role in industrial and agricultural advancement in Pakistan by providing quality fertilizers and allied services to its customers and given the passion to excel, take on fresh challenges, set new goals and take initiatives for development of profitable business ventures.
Corporate Vision
FFC's vision for the 21st Century remains focused on harmonizing the Company with fresh challenges and encompasses diversification and embarking on ventures within and beyond the territorial limits of the Country in collaboration with leading business partners.
RATIO ANALYSIS
ASSETS TEST RATIO:
NO.OF YEARS 2006 2007 2008 2009 2010 ASSETS TEST RATIO 0.966853 0.157412 0.053526 0.021681 0.033736
1 2 3 4 50
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Series1
1. Quick ratio or acid test ratio
o This is a ratio between quick current assets and current liabilities (alternatively quick
liabilities).
o It is calculated by dividing quick current assets by current liabilities (quick current
liabilities)
o Quick ratio = quick assets where
o Current liabilities/(quick liabilities)
o Conventionally a quick ratio of 1:1 is considered satisfactory.
Current Ratio:
NO OF YEARS 2006 2007 2008 2009 2010
CURRENT RATIO 0.893458 0.942059
0.821195 0.835498
0.83699
1 2 3 4 50.76
0.78
0.8
0.82
0.84
0.86
0.88
0.9
0.92
0.94
0.96
Series1
2. Current ratio
o It is calculated by dividing current assets by current liabilities.
o Current ratio = current assets
o Current liabilities
o Conventionally a current ratio of 2:1 is considered satisfactory
Cash to Current Assets:
NO.OF YEARS 2006 2007 2008 2009 2010CASH TO
CURRENTASSETS0.009775 0.007762 0.014104 0.008729 0.019524
1 2 3 4 50
0.002
0.004
0.006
0.008
0.01
0.012
0.014
0.016
0.018
0.02
Series1
3. Current assets
o Include –
Inventories of raw material, finished goods,
Stores and spares,
Sundry debtors/receivables,
Short term loans deposits and advances,
Cash in hand and bank,
Prepaid expenses,
Incomes receivables and
Marketable investments and short term securities.
Cash to Current Liabilities:
NO.OF YEARS 2006 2007 2008 2009 2010
CASH TO CURRENT LIABILITIES
0.008715
0.007312 0.011582
0.007293 0.016341
1 2 3 4 50
0.002
0.004
0.006
0.008
0.01
0.012
0.014
0.016
0.018
Series1
4. Current liabilities
o Include –
Sundry creditors/bills payable,
Outstanding expenses,
Unclaimed dividend,
Advances received,
Incomes received in advance,
Provision for taxation,
Proposed dividend,
Installments of loans payable within 12 months,
Bank overdraft and cash credit
A/ R TURN OVERRATIO:
NO.OF YEARS 2006 2007 2008 2009 2010
A/R TURN OVERRATIO 31.15252
16.50352 61.68787
140.7752 125.3628
1 2 3 4 50
20
40
60
80
100
120
140
160
Series1
5. Debtors turnover ratio
o This ratio is a test of the liquidity of the debtors of a firm. It shows the relationship between
credit sales and debtors.
o Debtors turnover ratio =
o Credit sales average debtors and bills receivables
Debt to Equity:
NO.OF YEARS 2006 2007 2008 2009 2010
DEBT TO EQUITY 1.120572
1.297024 1.598161
1.946818 1.787553
1 2 3 4 50
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Series1
6. Debt equity ratio
o This ratio indicates the relative proportion of debt and equity in financing the assets of the
firm. It is calculated by dividing long-term debt by shareholder’s funds.
o Debt equity ratio = long-term debts where
o Shareholders’ funds
o Generally, financial institutions favor a ratio of 2:1.
o However this standard should be applied having regarded to size and type and nature of
business and the degree of risk involved.
L T D TO CAPITALIZATION:
NO.OF YEARS 2006 2007 2008 2009 2010L T D TO
CAPITALIZATION0.21695
20.283413 0.38865
30.367907 0.312916
1 2 3 4 50
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
Series1
7. Debt to total capital ratio
o In this ratio the outside liabilities are related to the total capitalization of the firm. It
indicates what proportion of the permanent capital of the firm is in the form of long-term
debt.
o Debt to total capital ratio = long- term debt
o Shareholder’s funds + long- term debt
o Conventionally a ratio of 2/3 is considered satisfactory.
Interest Ratio:
NO.OF YEARS 2006 2007 2008 2009 2010
INTERST RATIO 14.9357 12.22182 12.92613
14.81794 16.00804
1 2 3 4 50
2
4
6
8
10
12
14
16
18
Series1
8. Interest coverage ratio
o This ratio measures the debt servicing capacity of a firm in so far as the fixed interest on
long-term loan is concerned. It shows how many times the interest charges are covered by
edit out of which they will be paid.
o Interest coverage ratio = edit
o Interest
o A ratio of 6 to 7 times is considered satisfactory. Higher the ratio greater the ability of the
firm to pay interest out of its profits. But too high a ratio may imply lesser use of debt
and/or very efficient operations
Payable Turnover Ratio:
NO.OF YEARS 2006 2007 2008 2009 2010PAYABLE TURN OVER
RATIO1.39421
21.109039 0.92874
20.805486 0.916602
12
34
5
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Series1
9. Creditors turnover ratio
o This ratio shows the speed with which payments are made to the suppliers for purchases
made from them. It shows the relationship between credit purchases and average creditors.
o Creditors turnover ratio =
o Credit purchases average creditors & bills payables
Total Assets Turnover:
NO.OF YEARS 2006 2007 2008 2009 2010TOTAL ASSETS TURN
OVER 1.090103 0.97222
40.958452 0.93804
60.39401
1 2 3 4 50
0.2
0.4
0.6
0.8
1
1.2
Series1
10.Asset turnover ratio
o Depending on the different concepts of assets employed, there are
o Many variants of this ratio. These ratios measure the efficiency of a firm in managing and
utilizing its assets.
o Total asset turnover ratio = sales/cost of goods sold
o Average total assets
o Fixed asset turnover ratio = sales/cost of goods sold
o Average fixed assets
o Capital turnover ratio = sales/cost of goods sold
o Average capital employed
o Working capital turnover ratio = sales/cost of goods sold
o Net working capital
GROSS PROFIT MARGIN:
NO.OF YEARS 2006 2007 2008 2009 2010
GROSS PROFIT MARGIN 0.324153
0.355886 0.403955
0.432709 0.435972
1 2 3 4 50
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
Series1
11.Gross profit margin
o This ratio is calculated by dividing gross profit by sales. It is expressed as a percentage.
o Gross profit is the result of relationship between prices, sales volume and costs.
o Gross profit margin = gross profit x 100 net sales
o A firm should have a reasonable gross profit margin to ensure coverage of its operating
expenses and ensure adequate return to the owners of the business i.e. the shareholders.
o To judge whether the ratio is satisfactory or not, it should be compared with the firm’s past
ratios or with the ratio of similar firms in the same industry or with the industry average.
NET PROFIT MARGIN:
NO.OF YEARS 2006 2007 2008 2009 2010
NET PROFIT MARGIN 0.154792 0.189277
0.156151 0.24398 0.245772
1 2 3 4 50
0.05
0.1
0.15
0.2
0.25
Series1
12.Net profit margin
o This ratio is calculated by dividing net profit by sales. It is expressed as a percentage.
o This ratio is indicative of the firm’s ability to leave a margin of reasonable compensation to
the owners for providing capital, after meeting the cost of production, operating charges and
the cost of borrowed funds.
o Net profit margin =
o Net profit after interest and tax x 100
o Another variant of net profit margin is operating profit margin which is calculated as:
o Operating profit margin =
o Net profit before interest and tax x 100
o Higher the ratio, greater is the capacity of the firm to withstand adverse economic
conditions and vice versa
RETURN ON INVESTMENT:
NO.OF YEARS 2006 2007 2008 2009 2010RETURN ON
INVESTMENT0.16873
90.184019 0.14966
30.228865 0.096836
1 2 3 4 50
0.05
0.1
0.15
0.2
0.25
Series1
13.Return on assets
o This ratio measures the profitability of the total funds of a firm. It measures the relationship
between net profits and total assets. The objective is to find out how efficiently the total
assets have been used by the management.
o Return on assets =
o Net profit after taxes plus interest x 100
o Total assets
o Total assets exclude fictitious assets. As the total assets at the beginning of the year and end
of the year may not be the same, average total assets may be used as the denominator.
RETURN ON EQUITY:
YEARS2006 2007 2008 2009 2010
RETURN ON EQUITY 0.357823
0.422697 0.388482
0.067442 0.713955
1 2 3 4 50
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Series1
14.Return on shareholders’ equity
o This ratio measures the relationship of profits to owner’s funds. Shareholders fall into two
groups i.e. Preference shareholders and equity shareholders. So the variants of return on
shareholders’ equity are
o Return on total shareholder’s equity =
o Net profits after taxes x 100
o Total shareholders’ equity
o Total shareholder’s equity includes preference share capital plus equity share capital plus
reserves and surplus less accumulated losses and fictitious assets. To have a fair
representation of the total shareholders’ funds, average total shareholders’ funds may be
used as the denominator
BALANCE SHEET
2006 2007 2008 2009 2010
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 9607957 10390490 12730813 13993518 15933588
Good will 1569234 1569234 1569234 1569234 1569234
Long term Investment 6409382 6325129 7744779 7727528 78700727
Long term loans and advantages 76647 142782 163102 337541 455328
Long term deposit and prepayments 2474 2144 1524 6305 9037
other assets 45000 0 0 0
17710694 18429779 22209452 23634126 96667914
CURRENT ASSETS
Store spare losses tools 2202053 2407988 3034268 2996633 2440201
Stock in trade 952905 642836 258094 144087 211720
Trade debts 961427 1722602 495929 256886 357956
Loan and advantages 95245 83917 136944 130219 336269
deposit and prepayments 25488 33665 107369 37653 50188
other receivable 1451390 1542763 1233479 734062 617664
short term investment 2452850 3027664 3511563 6768568 12020581
cash and bank balances 1623229 1350000 931865 3849348 1189063
Total Current Assets 9764587 10811435 9709511 14917456 17223642
Total Assets 27475281 29241214 31918963 38551582 113891556
EQUITY AND LIABILITIES
Issued, subscribed and paid up share capital
4934742 4934742 4934742 6785271 6785271
Capital Reserves 160000 160000 160000 160000 160000
Revenue Reserves 7861801 7635303 7190471 6137171 8502276
Total Equity 1295654
31273004
5 12285213 13082442 15447547
NON-CURRENT LIABILITIES
Long term borrowing 1193750 2671250 5378214 4578809 3819405
deferred liabilities 2396000 2363526 2431895 3035757 3215821
3589750 5034776 7810109 7614566 7035226
CURRENT LIABILITIES
Current maturity of long term loan 887327 1022500 743036 1799405 1759405
trade and other payable 4025926 5815276 5993674 8002897 9614026 interest markup accrued long term loan 134039 184430 194570 147329 137968
Short term borrowing 4531090 3141081 3114000 6088348 5640420
Taxation 1350606 1313106 1778361 1816595 3426264
Total Current Liabilities1092898
81147639
3 11823641 17854574 20578083
TOTAL LIABILITIES
14518738
16511169 19633750 25469140 27613309
TOTAL EQUITY AND LIABILITIES
27475281
29241214 31918963 38551582 43060856
INCOME STATEMENT
2006 2007 2008 2009 2010
Sales 29950873 28429005 30592806 36163174 44874359
Cost of Goods Sold 20242194 18311525 18234692 20515044 25310406
Gross Profit 9708679 10117480 12358114 15648130 19563953
Distribution Cost 2746782 2418793 2668571 3174505 3944473
Other Operating Expenses 735331 845327 895647 1272448 1376000
3482113 3264120 3564218 4446953 5320473
6226566 6853360 8793896 11201177 14243480
Other Operating Income 1259819 1658000 194558 2800987 3153110
Gain on Sale on Investment
Profit From Operations 7486385 8511360 8988454 14002164 17396590
Finance Cost 501241 696407 695371 944947 1086741
Profit Before Taxation 6985144 7814953 8293083 13057217 16309849
Provision For Taxation 2349000 2434000 3516000 4234111 5281000
Profit After Taxation 4636144 5380953 4777083 8823106 11028849
ENGRO CORPORATION
AWARD
INTRODUCTION
Engro is one of Pakistan’s most progressive, growth oriented organizations, yet we never forget where we came from. Our history is a part of who we are today. Our diverse range of companies represents our rich legacy of innovation and growth.
Engro Corporation Limited is one of Pakistan’s largest conglomerates with businesses ranging from fertilizers to power generation.
In the interest of better managing and overseeing businesses of subsidiaries and affiliates that are currently part of Engro’s capital investments, Engro Chemical Pakistan Limited converted into a holding company structure. As part of this process, two major changes occurred with effect from January 1, 2010; Engro Chemical was renamed as Engro Corporation Limited and it demerged and transferred its fertilizer business into a separate wholly owned subsidiary, Engro Fertilizers Limited.
Currently Engro Corporation’s portfolio consists of seven businesses which include chemical fertilizers, PVC resin, a bulk liquid chemical terminal, industrial automation, foods, power generation and commodity trade.
Besides providing the long term vision for the company and overseeing performance of the subsidiaries and affiliates, Engro Corporation Limited is also responsible for allocation of capital, management of talent, leadership development, HR guiding policies, leadership role in public relations and CSR activities, control structures, legal and IT support.
From its inception as Esso Pakistan Fertilizer Limited in 1965 to Engro Corporation Limited in 2010, Engro has come a long way and will continue working towards its vision of becoming a premier Pakistani company with a global reach.
CULTURE
Engro is about the people who are a part of us. Our culture is dynamic and energetic, with emphasis on our core values and loyalty of our employees. Our work environment promotes leadership, integrity, teamwork, diversity and excellence.
The tone for our corporate culture and the importance of employees was set after the Company was bought out by employees in 1991. As the Company grows, we are determined to keep our culture open and transparent, and inclusive for all our employees.
DIFFRENCE BUSINESS
Our diversified businesses represent our immense growth potential to generate opportunities for creating and sustaining value for our stakeholders.
Engro Fertilizers LimitedEngro Foods LimitedEngro Polymer & Chemicals LimitedEngro Powered LimitedEngro EXIMP Private LimitedEngro Vopak Terminal Limited
RATIO ANALYSIS
CURRENT RATIO:
NO.OF YEARS 2006 2007 2008 2009 2010
CURRENT RATIO 7.468622 0.92006 2.007253
0.73266 0.073614
1 2 3 4 50
1
2
3
4
5
6
7
8
Series1
15.Current ratio
o It is calculated by dividing current assets by current liabilities.
o Current ratio = current assets where
o Current liabilities
o Conventionally a current ratio of 2:1 is considered satisfactory
ASSETS TEST RATIO:
NO.OF YEARS 2006 2007 2008 2009 2010
ASSETSTEST RATIO 0.168678
0.049917 0.332092
0.106089 0.002094
1 2 3 4 50
0.05
0.1
0.15
0.2
0.25
0.3
0.35
Series1
16.Quick ratio or acid test ratio
o This is a ratio between quick current assets and current liabilities (alternatively quick
liabilities).
o It is calculated by dividing quick current assets by current liabilities (quick current
liabilities)
o Quick ratio = quick assets where
o Current liabilities/(quick liabilities)
o Conventionally a quick ratio of 1:1 is considered satisfactory.
CASH TO C.A:
NO.OF YEARS 2006 2007 2008 2009 2010
CASH TO C.A 0.022585 0.054254
0.157705 0.13668 0.018203
1 2 3 4 50
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
Series1
17.Current assets
o Include –
Inventories of raw material, finished goods,
Stores and spares,
Sundry debtors/receivables,
Short term loans deposits and advances,
Cash in hand and bank,
Prepaid expenses,
Incomes receivables and
Marketable investments and short term securities.
CASH TO C.L:
NO.OF YEARS 2006 2007 2008 2009 2010
CASH TO C.L 0.168678 0.049917
0.316555 0.10014 0.00134
1 2 3 4 50
0.05
0.1
0.15
0.2
0.25
0.3
0.35
Series1
18.Current liabilities
o Include –
Sundry creditors/bills payable,
Outstanding expenses,
Unclaimed dividend,
Advances received,
Incomes received in advance,
Provision for taxation,
Proposed dividend,
Installments of loans payable within 12 months,
Bank overdraft and cash credit
Debt to equity
NO.OF YEARS 2006 2007 2008 2009 2010
Debt to equity 1.967592
1.305924 1.715199
4.034711 3.802106
1 2 3 4 50
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Series1
19.Debt equity ratio
o This ratio indicates the relative proportion of debt and equity in financing the assets of the
firm. It is calculated by dividing long-term debt by shareholder’s funds.
o Debt equity ratio = long-term debts where
o Shareholders’ funds
o Generally, financial institutions favor a ratio of 2:1.
o However this standard should be applied having regarded to size and type and nature of
business and the degree of risk involved.
L.T.D.TO CAPITALIZATION:
NO.OF YEARS 2006 2007 2008 2009 2010L.T.D.TO
CAPITALIZATION0.63134
40.186259 0.58851
90.764511 0.061648
12
34
5
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Series1
20.Debt to total capital ratio
o In this ratio the outside liabilities are related to the total capitalization of the firm. It
indicates what proportion of the permanent capital of the firm is in the form of long-term
debt.
o Debt to total capital ratio = long- term debt
o Shareholder’s funds + long- term debt
o Conventionally a ratio of 2/3 is considered satisfactory.
INTREST RATIO:
NO.OF YEARS 2006 2007 2008 2009 2010
INTREST RATIO 10.50102 8.916505
4.449141 3.52158 10.49967
1 2 3 4 50
2
4
6
8
10
12
Series1
21.Interest coverage ratio
o This ratio measures the debt servicing capacity of a firm in so far as the fixed interest on
long-term loan is concerned. It shows how many times the interest charges are covered by
edit out of which they will be paid.
o Interest coverage ratio = edit
o Interest
o A ratio of 6 to 7 times is considered satisfactory. Higher the ratio greater the ability of the
firm to pay interest out of its profits. But too high a ratio may imply lesser use of debt
and/or very efficient operations
PAYABLE TURN OVER RATIO:
NO.OF YEARS 2006 2007 2008 2009 2010PAYABLE TURN OVER
RATIO0.701125 0.84513
10.47411 0.30947 0.181204
1 2 3 4 50
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Series1
22.Creditors turnover ratio
o This ratio shows the speed with which payments are made to the suppliers for purchases
made from them. It shows the relationship between credit purchases and average creditors.
o Creditors turnover ratio =
o Credit purchases average creditors & bills payables
ASSETS TURNOVER:
NO.OF YEARS 2006 2007 2008 2009 2010
ASSETS TURNOVER 0.612249
0.60758 0.407895
0.321969 0.262487
1 2 3 4 50
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Series1
23.Asset turnover ratio
o Depending on the different concepts of assets employed, there are
o Many variants of this ratio. These ratios measure the efficiency of a firm in managing and
utilizing its assets.
o Total asset turnover ratio = sales/cost of goods sold
o Average total assets
o Fixed asset turnover ratio = sales/cost of goods sold
o Average fixed assets
o Capital turnover ratio = sales/cost of goods sold
o Average capital employed
o Working capital turnover ratio = sales/cost of goods sold
o Net working capital
GROSS PROFIT:
NO.OF YEARS 2006 2007 2008 2009 2010
GROSS PROFIT 0.240727
0.212241 0.265751
0.229731 0.453421
1 2 3 4 50
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5
Series1
24.Gross profit margin
o This ratio is calculated by dividing gross profit by sales. It is expressed as a percentage.
o Gross profit is the result of relationship between prices, sales volume and costs.
o Gross profit margin = gross profit x 100 net sales
o A firm should have a reasonable gross profit margin to ensure coverage of its operating
expenses and ensure adequate return to the owners of the business i.e. the shareholders.
o To judge whether the ratio is satisfactory or not, it should be compared with the firm’s past
ratios or with the ratio of similar firms in the same industry or with the industry average.
NET PROFIT:
NO.OF YEARS 2006 2007 2008 2009 2010
NET PROFIT 0.144717
0.136072 0.181858
0.068682 0.344249
1 2 3 4 50
0.05
0.1
0.15
0.2
0.25
0.3
0.35
Series1
25.Net profit margin
o This ratio is calculated by dividing net profit by sales. It is expressed as a percentage.
o This ratio is indicative of the firm’s ability to leave a margin of reasonable compensation to
the owners for providing capital, after meeting the cost of production, operating charges and
the cost of borrowed funds.
o Net profit margin =
o Net profit after interest and tax x 100
o Another variant of net profit margin is operating profit margin which is calculated as:
o Operating profit margin =
o Net profit before interest and tax x 100
o Higher the ratio, greater is the capacity of the firm to withstand adverse economic
conditions and vice versa
RETURN ON INVESTMENT:
NO.OF YEARS 2006 2007 2008 2009 2010RETURN ON
INVESTMENT0.08860
30.082675 0.07417
90.022114 0.090361
1 2 3 4 50
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.1
Series1
26.Return on assets
o This ratio measures the profitability of the total funds of a firm. It measures the relationship
between net profits and total assets. The objective is to find out how efficiently the total
assets have been used by the management.
o Return on assets =
o Net profit after taxes plus interest x 100
o Total assets
o Total assets exclude fictitious assets. As the total assets at the beginning of the year and end
of the year may not be the same, average total assets may be used as the denominator.
RETURN ON EQUITY:
NO.OF YEARS 2006 2007 2008 2009 2010
RETURN ON EQUITY 0.262938
0.190641 0.201411
0.111335 0.433922
1 2 3 4 50
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
Series1
27.Return on shareholders’ equity
o This ratio measures the relationship of profits to owner’s funds. Shareholders fall into two
groups i.e. Preference shareholders and equity shareholders. So the variants of return on
shareholders’ equity are
o Return on total shareholder’s equity =
o Net profits after taxes x 100
o Total shareholders’ equity
o Total shareholder’s equity includes preference share capital plus equity share capital plus
reserves and surplus less accumulated losses and fictitious assets. To have a fair
representation of the total shareholders’ funds, average total shareholders’ funds may be
used as the denominator
o
BALANCE SHEET
2006 2007 2008 2009
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 6557603 13811683 33552912 69517512
Intangible Asset 18062 133867 122858 122704
Long term investment 3657596 7764482 11091857 12988657
Deferred employee compensation expenses 0 0 136071 2787
Long term loans and advances 63109 49421 218820 328907
10296370 21759453 45122518 82960567 126506529
CURRENT ASSETS
Stores and spares 688568 740873 800091 961117
Stock in trade 923448 2690153 4680896 422607
Trade debts 623349 1408885 261508 2514425
Deferred employee compensation expenses 0 0 93213 87278
Loans, advances, deposits, prepayments 416758 889621 1899124 1469155
Other receivables 998565 2360495 452168 275714
Derivate financial instruments 0 0 1481626 76209
Tax recoverable 0 535699 618746 536167
Short term investment 228518 6153948 67811 450857
Cash and bank balances 1805240 1617524 1687038 3955342
Other assets 12768494
Total Current Assets 18452940 16397198 12042221 10748871
Total Assets 28749310 38156651 57164739 93709438 134192707
EQUITY AND LIABILITIES
Issued, subscribed and paid up share capital
2000000 3000000 2128161 2979426
share premium 1068369 3963977 7152722 1055061
Hedging reserve 0 1037386 127307 288258
General reserve 4429240 4429240 4429240 4429240
unapporiated profit 2190148 4116622 6911124 9250972
Employee share compensation 0 0 305052 609719
Total Equity 9687757 16547225 21053606 18612676
NON-CURRENT LIABILITIES
Borrowing 15422520 1800000 27756714 58565354
Derivate financial instrument 0 0 918050 612842
Deferred liabilities 1127139 1948980 1319432 988169
Employee housing subsidy 0 0 73319 211785
Retirement and others benefits 41165 38560 44265 47581
16590824 3787540 30111780 60425731
CURRENT LIABILITIES
Trade and other payable 0 0 2915274 3160852
Accrued interest/mark up 0 0 804390 1366022
current portion of:
Borrowing 1087500 1300000 0 810100
Others benefits obligations 16477 18662 76600 20600
Short term investment 129996 0 18352 195753
Derivate financial instrument 1081745 3752945 1711257 740043
Taxation 72651 0 155160 0
Unclaimed dividend 82360 193067 318320 102099
Other liabilities 0 12557212 8275562
Total Current Liabilities 2470729 17821886 5999353 14671031
TOTAL LIABILITIES 19061553 21609426 36111133 75096762
TOTAL EQUITY AND LIABILITIES 28749310 38156651 57164739 93709438
INCOME STATEMENT
2006 2007 2008 2009
Sales 17601738 23183222 23317198 30171520
Cost of Goods Sold 13364529 18262793 17120635 23240176
Gross Profit 4237209 4920429 6196563 6931344
Distribution Cost 1481730 1641724 1657815 1945176
Administrative Expenses 0 0 0 0
Other Operating Expenses 287176 339430 579556 424110
1768906 1981154 2237371 2369286
2468303 2939275 3959192 4562058
Other Operating Income 1338854 1831260 2754330 88467
Profit From Operations 3807157 4770535 6713522 4650525
Finance Cost 362551 535023 1508948 1320579
Profit Before Taxation 3444606 4235512 5204574 3329946
Provision For Taxation 897330 1080929 964144 1257696
Profit After Taxation 2547276 3154583 4240430 2072250
1 www. engro.com
2 www.fauji fertilizer.com
3 fauji fertilizer site:wikipedia.org
4 engro site:wikipedia.org
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