Table of Contents
INCOME STATEMENT .......................................................................................................................................... 2
BALANCE SHEET ................................................................................................................................................... 4
Income Statement - Year-to-Year Percentage Changes ........................................................................ 6
ACTIVITY RATIOS & ANALYSIS ....................................................................................................................... 8
Inventory Turnover ......................................................................................................................................................... 8
Total Asset Turnover ....................................................................................................................................................... 8
Average Collection Period ............................................................................................................................................. 9
Recieveable Turnover ................................................................................................................................................... 10
Days Receivables ............................................................................................................................................................. 10
Days Inventory ................................................................................................................................................................. 11
Fixed Asset Turnover .................................................................................................................................................... 12
LIQUIDITY RATIOS & ANALYSIS ................................................................................................................... 12
Current Ratio .................................................................................................................................................................... 12
Quick Ratio ........................................................................................................................................................................ 13
Cash Ratio .......................................................................................................................................................................... 14
LEVERAGE RATIOS & ANALYSIS.................................................................................................................... 14
Debt to Asset Ratio ......................................................................................................................................................... 14
Debt to Equity Ratio....................................................................................................................................................... 15
Coverage Ratio ................................................................................................................................................................. 16
PROFITABLITY RATIOS & ANALYSIS .............................................................................................................. 16
Net Profit Margin ............................................................................................................................................................ 16
Return on Asset ............................................................................................................................................................... 17
Gross Profit Margin ........................................................................................................................................................ 18
CONCLUSION ......................................................................................................................................................... 18
1
FATIMA GROUP OF COMPANIES
FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial strengths and
weaknesses of the firm and establishing relationship between the items of the balance sheet and
profit & loss account.
Financial ratio analysis is the calculation and comparison of ratios, which are derived
from the information in a company’s financial statements. The level and historical trends of these
ratios can be used to make inferences about a company’s financial condition, its operations and
attractiveness as an investment. The information in the statements is used by
Trade creditors, to identify the firm’s ability to meet their claims i.e. liquidity position of the
company.
Investors, to know about the present and future profitability of the company and its financial
structure.
Management, in every aspect of the financial analysis. It is the responsibility of the
management to maintain sound financial condition in the company.
2
INCOME STATEMENT Year Year
In Thousands 2013 2012
Revenue component 1
$
-
$
-
Revenue component 2
Revenue component 3
Revenue component 4
Total Revenues or Sales
33,495,889
29,518,623
Cost of Goods Sold
13,712,677
12,252,427
Operating Income
19,783,212
17,266,196
Selling Expenses
1,430,122
1,233,944
General & Administrative
1,098,985
738,792
Earnings Before Interest, Taxes,
Depreciation & Amortization
(EBITDA)
17,254,105
15,293,460
Depreciation and Amortization
5,179,348
6,279,956
Earnings Before Interest &
Taxes (EBIT)
12,074,757
9,013,504
245,776
67,033
Net Interest Expense
4,298,348
2,969,418
Other Expense (Income)
3
Net Income Before Taxes (NIBT)
8,022,185
6,111,119
Income Tax Expense
Net Income After Taxes (NIAT)
$
8,022,185
$
6,111,119
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
2013 2012
Revenues
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
2013 2012
Net Income After Taxes
4
BALANCE SHEET
Year Year
2013 2012
In Thousands 2013 2012
Assets
Cash & Cash Equivalents
$
238,294
$
984,144
Accounts Receivable
1,674,063
1,467,655
Inventory
3,850,150
3,230,805
Stores & Spares
Short term Loan to associated
Company
3,000,000
Stock in Trade
2,702,076
2,507,927
Trade Debts
99,181
138,480
Prepaid Expenses & Deposits
Other Current Assets
Total Current Assets
11,563,764
8,329,011
Property Plant and Equipment
65,695,396
65,882,892
Intangible Assets
42,726
33,881
Longterm Deposits
10,248
11,361
Longterm Investments
85,190
85,190
5
Liabilities and Stockholder's Equity
Liabilities
Accounts Payable
6,650,695
4,996,727
Accrued Liabilities
383,432
499,478
Short term Finance Secured
2,302,516
2,690,246
Current Maturities of LT Debt
5,938,078
4,085,379
Related Party Notes Payable
Other Current Liabilities
Total Current Liabilities
15,274,721
12,271,830
LT Debt, net of current portion
22,647,450
27,023,742
Dividend & Markup Payable
-
2,917,615
Deferred Income Taxes
8,608,816
4,843,755
Total Liabilities
46,530,987
47,056,942
Stockholder's Equity
Capital Work in Progress
1,892,621
1,662,461
Other Fixed Assets
Total Fixed Assets
67,726,181
67,675,785
Total Assets
79,289,945
76,004,796
6
Common Stock
21,000,000
21,000,000
Retained Earnings
9,968,958
6,157,854
Share Premium
1,790,000
1,790,000
Additional Paid-in Capital
Other Equity
Total Stockholder's Equity
32,758,958
28,947,854
Total Liabilities & Stockholder's Equity
Must match with Total Assets
$
79,289,945
$
76,004,796
Working Capital
(Current Assets
- Current Liabilities)
$
(3,710,957)
$
(3,942,819)
Income Statement - Year-to-Year Percentage Changes
2013
% Increase (Decrease)
Over Previous Year
2012
% Increase
(Decrease) Over
Previous Year
Two-Yr Average
Percentage
Increase/(Decrease)
Revenue component 1
Revenue component 2
Revenue component 3
Revenue component 4
Total Revenues or
Sales (11.87%) (100.00%) (55.94%)
7
Cost of Goods Sold (10.65%) (100.00%) (55.32%)
Operating Income (12.72%) (100.00%) (56.36%)
Selling Expenses (13.72%) (100.00%) (56.86%)
General &
Administrative (32.78%) (100.00%) (66.39%)
Earnings Before
Interest, Taxes,
Depreciation &
Amortization
(EBITDA) (11.36%) (100.00%) (55.68%)
Depreciation and
Amortization 21.25% (100.00%) (39.38%)
Earnings Before
Interest & Taxes
(EBIT) (25.35%) (100.00%) (62.68%)
Net Interest Expense (30.92%) (100.00%) (65.46%)
Other Expense
(Income)
Net Income Before
Taxes (NIBT) (23.82%) (100.00%) (61.91%)
Income Tax Expense
Net Income After
Taxes (NIAT) (23.82%) (100.00%) (61.91%)
8
ACTIVITY RATIOS & ANALYSIS Activity ratios are used to measure the speed with which various accounts are converted into sales
or cash. With regard to current accounts, measures of liquidity are generally inadequate
Inventory Turnover
Inventory Turnover 2013 2012
COGS 13,712,677 12,252,427
÷
Inventory 1,674,063 1,467,655
=
Inventory Turnover 8.19 8.35
Interpretation
The increase in CGS indicates that production is more in year 2013. Inventory turnover commonly
measure the activity, or liquidity, of a firm’s inventory. This ratio is used to measure the number
of times a company sells its inventory during the period. High inventory turnover ratio is considered as good and the logic is that company is efficiently managing and selling its inventory.
Inventory turnover of the company is 8.19 times in the year 2013 and it has decreased from the
previous year ratio that is 8.35. There is very slight change in the ratio
Total Asset Turnover
Total-Asset Turnover 2013 2012
Sales 33,495,889 29,518,623
÷
Total Assets 79,289,945 76,004,796
= Total Asset
Turnover 0.42 0.39
8.19
8.35
8.10
8.15
8.20
8.25
8.30
8.35
8.40
2013 2012
9
INTERPRET
This type of ratio is used to measure the efficiency of the company that how nicely the company
used their total assets to generate revenue. Total assets turnover indicates the efficiency with which
the firm uses all its assets to generate sales. Generally, the higher a firm’s total asset turnover, the
more efficiently its assets have been used. This measure is probably of greatest interest to
management, because it indicates whether the firm’s operations have been financially efficient.
Fatima Fertilizers have increased ratio of Total Asset Turnover. As compare to previous year it is
managed well efficiently. In 2012 this ratio was 0.39 and in year 2013 it is increased and goes at
0.42 times.
Average Collection Period
Average Collection Period 2013 2012
A/R 1,674,063 1,467,655
÷ Average Daily Sales 91,769.6 80,872.9
= Average Collection
Period (days) 18.24 18.15
INTERPRET
Average collection period indicates that how many days are required to collect amount from the
trade debts. The earlier the cash is received from the debtors; the better will be for the company.
Average collection period of the company showed nominal change in the collection period. This
means that company’s average collection is almost same.
0.42
0.39
0.37
0.38
0.39
0.40
0.41
0.42
0.43
2013 2012
18.24
18.15
18.10
18.15
18.20
18.25
2013 2012
10
Recieveable Turnover
2013
Receivables Turnover sales Insert sales below
Insert receivables below
20.0087 receivables 33495889.00 1674063.00 2012
Receivables Turnover sales Insert sales below
Insert receivables below
20.1128 receivables 29518623.00 1467655.00
INTERPRET
This ratio indicates that how many times accounts receivable is converted into cash a high turnover
indicates the efficiency of the management. Accounts receivable turnover has increased to 49.46
times in 2013 from 43.62 times in the year 2012. This is a good sign for the company. So Fatima
Fertilizers is converting its receivables into cash quickly as compared to 2012.
Days Receivables
2013
Days Receivables 360 Insert receivables turn below
17.9922 receivables turn
360 20.01 2012
Days Receivables 360 Insert receivables turn below
17.8990 receivables turn
360 20.11
0.4
0.45
0.5
2012 2013
Series1
11
INTERPRET
Average collection period ratio is used to determine the average number of days required to
convert account receivables/debtors into cash. The earlier the cash is received from the debtors;
the better will be for the company. Average collection period of the company has reduced a little bit
in year 2013 from the year 2012. This shows that company is almost performing same in collection
as were in previous year.
Days Inventory
2013
Days Inventory 360 Insert inventory turn below
43.9560 inventory turn
360 8.19 2012
Days Inventory 360 Insert inventory turn below
43.1138 inventory turn
360 8.35
INTERPRET
Average age of inventory tells that for how many days on average the inventory is held .The greater
the number of days, the inefficient will be the management. Average age of inventory of the company
has increased to 0.49 year 2013 from 0.43 in 2012. This shows inventory is kept for high number of
days as compared to the last year.
0
1
2
3
2012 2013
Series1
0.4
0.45
0.5
2012 2013
Series1
12
Fixed Asset Turnover
2013
Fixed Asset Turnover Sales Sales Net Fixed Asset
0.4946 Net Fixed Asset 33495889.00 67726181.00 2012
Fixed Asset Turnover Sales Sales Net Fixed Asset
0.4362 Net Fixed Asset 29518623.00 67675785.00
INTERPRET
This ratio is used to measure the productivity of the company that how nicely a company
used their fixed assets in order to generate certain level of revenue.
Net fixed assets turnover of the company is 49.46 times in the year 2013 which has significantly
Increased as compared to the last year’ s turnover of 43.62times. This is a good sign for the company.
As we know that higher the ratio higher will be the utilization of the total fixed asset to
produce revenue. Here fixed asset turnover ratio is increased over the year so there is efficient
utilization of company’s fixed assets to produce revenue.
LIQUIDITY RATIOS & ANALYSIS
Current Ratio
Current Ratio 2013 2012
Total Current Assets 11,563,764 8,329,011
÷
Total Current Liabilities 15,274,721 12,271,830
= Current Ratio 0.76 0.68
0.4362
0.4946
0.4
0.45
0.5
2012 2013
Series1
13
INTERPRET
Current ratio of the company in 2012 was 0.68 and it is increased in the year 2013 which is 0.76. There is increase in Current Ratio. Now we can see that the figure has increased in the current ratio when compared to the year 2012. • It’s a positive sign for the progress of the company
Quick Ratio
Quick Ratio 2013 2012
Total Current Assets - Inventories 7,713,614 5,098,206
÷ Total Current Liabilities 15,274,721 12,271,830
= Quick Ratio 0.50 0.42
INTERPRET
Quick assets are those assets which can be converted into cash within a short period of time. The
above comparison shows that the quick ratio has increased as the company ended the year 2013.
It is a healthy sign for the company.
• Now it has already been discussed that the company’ current assets have increased comparatively.
The financial statements show that the firm’s inventory has decreased. That has caused the quick
ratio figure to increase.
• Hence the firm’s overall ability to satisfy the short –term obligations is increasing which is good.
0.76
0.68
0.60
0.65
0.70
0.75
0.80
2013 2012
0.50
0.42
-
0.20
0.40
0.60
2013 2012
14
Cash Ratio
2013
Cash Ratio Cash & Cash Equivalent
Cash & Cash Equivalent Current Liabilities
0.0156 Current Liabilities
238294.00 15274721.00 2012
Cash Ratio Cash & Cash Equivalent
Cash & Cash Equivalent Current Liabilities
0.0802 Current Liabilities
984144.00 12271830.00
INTERPRET
Cash Ratio is an indicator of company's short-term liquidity. It measures the ability to use its cash
and cash equivalents to pay its current financial obligations.
Cash ratio measures the immediate amount of cash available to satisfy short-term liabilities. A cash ratio of 0.5:1 or higher is preferred. In 2013 cash ratio is decreased by 2012. Which is not up to the
mark.
LEVERAGE RATIOS & ANALYSIS Debt to Asset Ratio
Debt-to-Assets Ratio 2013 2012
Total Debt 46,530,987 47,056,942
÷ Total Assets 79,289,945 76,004,796
= Debt-to-Assets Ratio 0.59 0.62
2012
2013
15
INTERPRET
The debt ratio measures the proportion of total assets financed by the firm’s creditors. The higher
this ratio, the greater the amount of other people’s money being used in an attempt to generate
profits. Fatima Fertilizers debt ratio has decreased to 59% in the year 2013 from 62% in the year
2012. This shows that the company has decreased its dependence on the outsider’s sources of
finances.
Debt to Equity Ratio
Debt-to-Equity Ratio 2013 2012
Total Debt 46,530,987 47,056,942
÷ Total Equity 32,758,958 28,947,854
= Debt-to-Equity Ratio 1.42 1.63
INTERPRET
The debt-equity ratio indicates the relationship between the long-term funds provided by creditors
and those provided by the firm’s owners. It is commonly used to measure the degree of financial
leverage of the firm. Fatima Fertilizer’s debt equity ratio is 1.42 in the year 2013 and has decreased
significantly from 1.63 in the year 2012. This shows that debts are less as compared to shareholders
equity.
1.42
1.63
1.30
1.35
1.40
1.45
1.50
1.55
1.60
1.65
2013 2012
0.5
9
0.6
2
2 0 1 3 2 0 1 2
16
Coverage Ratio
Times Interest Earned (TIE) or Coverage Ratio 2013 2012
EBIT 12,074,757 9,013,504
÷ Interest Expense 4,298,348 2,969,418
= Times Interest Earned 2.81 3.04
INTERPRET
Interest coverage ration tells that how many times the firm is able to pay its financial charges out of
its profit .A high ratio is desirable. This ratio for the company is 2.81 times in the year 2013 and has
significantly decreased from 3.04 times in the year 2012. This not shows good sign for the company.
The decreasing trend shows that the firm is not having ability to make contractual interest
payments.
PROFITABLITY RATIOS & ANALYSIS
Net Profit Margin
2013 2012
NIAT 8,022,185 6,111,119 ÷ Sales 33,495,889 29,518,623
= Net Profit Margin 0.24 0.21
2.81
3.04
2.65 2.70 2.75 2.80 2.85 2.90 2.95 3.00 3.05 3.10
2013 2012
17
Interpretation
The net profit ratio is the overall measure of the firm’s ability to turn each rupee of income from
services in net profit. If the net margin is inadequate the firm will fail to achieve return on
shareholder’s funds. High net profit ratio will help the firm service in the fall of income from services,
rise in cost of production or declining demand.
The net profit is increased because the income from services is increased. The increment resulted a
slight increase in 2013 ratio compared with the year 2012.
Return on Asset
Return on Assets 2013 2012
NIAT 8,022,185 6,111,119 ÷ Total Assets 79,289,945 76,004,796
= Return on Assets 0.10 0.08
Interpretation
This is the ratio between net profit and total assets. The ratio indicates the return on total
assets in the form of profits.
The net profit is increased in the current year because of the increment in the income from
services due to the increase in Operations.
0.24
0.21
0.19
0.20
0.21
0.22
0.23
0.24
0.25
2013 2012
0.10
0.08
-
0.02
0.04
0.06
0.08
0.10
0.12
2013 2012
18
Gross Profit Margin
Gross Profit Margin 2013 2012
Sales – COGS 19,783,212 17,266,196
÷ Sales 33,495,889 29,518,623
= Gross Profit Margin 0.59 0.58
INTERPRET
Gross profit for the year increased significantly to PKR 19.8 Billion reflecting an increase of PKR 2.5
Billion over last year with an overall increase of 14.6%, showing efficient utilization of raw material
in spite the unfavorable exchange rate fluctuation which directly impacted the cost of production.
Gross margins registered a slight improvement to 59.1% against 58.5% last year.
CONCLUSION
In the end I conclude that Fatima Fertilizer is operating well than year 2012. All the ratios showed
that Fatima Fertilizer is progressing. Some of the areas are must be undertaken to remove
discrepancies and make company more profit able.
0.59
0.58
0.58
0.58
0.59
0.59
0.59
0.59
2013 2012