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Executive Summary Through this report, I’ve discussed about the two major textile companies that are AL-karam and Gul Ahmed textile mills. I possess conducted a ratio research from the information gathered from other financial transactions. In my research, I found away that AL-Karam is doing fairly well via Gul Ahmed textiles since various proportions proved to be great in terms of AL-Karam textiles.
Accounting Policies Through accounting tactics and the techniques of computation used in the preparation of this economic information are identical as those applied in the preparation of financial statements pertaining to the year finished June 35, 2011.
These kinds of financial assertions have been well prepared in accordance with permitted accounting criteria as relevant in Pakistan. Approved accounting standards contain such Worldwide Financial Reporting Standards (IFRS) issued by International Accounting Standards Panel as are informed under the Corporations Ordinance, 1984, provisions of and assignments issued underneath the Companies Ordinance, 1984. In the event requirements differ, the procedures or connaissance of the Companies Ordinance, 1984 shall get over operating possessions.
Operating resources are mentioned at are cheaper accumulated devaluation and any kind of identified disability loss other than leasehold land which is mentioned at price. No amount is presented on leasehold land because the lease is renewable in the option of the lessee. Downgrading is billed on lowering balance method at costs specified in the note 13. 1 . Complete year’s depreciation is incurred on improvements except key additions or perhaps extensions to production establishments which are declined on pro-rata basis pertaining to the period useful during the year with out depreciation is charged upon assets back in of their removal.
Structures about leased retail outlets are lowered over the respective lease term. Gains and losses on disposal of operating possessions are contained in profit and loss accounts. Capital work-in-progress Capital work-in-progress is explained at price accumulated to the balance sheet time and represents spending incurred in property, grow and gear in the course of structure. These expenditures are used in relevant class of property, plant and products as and when the asset starts operation. Intangible assets Intangible assets will be stated at cost less accumulated amortization.
Amount is charged over the useful life from the assets on the systematic basis to income applying those straight line method at the price specified in note 13. Investments Investments in subsidiary firm are explained at cost. The Company reconsiders the carrying amount in the investments to assess whether there is certainly any indicator of disability loss. In the event such indication exists, the carrying amount is lowered to recoverable amount plus the difference is recognized as an expense. Exactly where an impairment loss therefore reverses, the carrying amount of the expenditure is increased to the modified recoverable quantity.
The reversal of this kind of impairment reduction is recognized as earnings. GUL AHMED Financial Percentages | 2010| 2009| liquidity| Current ratios| 0. 97| 0. 95| QuickRatio| 0. 39| 0. 44| Leverage| TotaldebttoTotalassetsratio| seventy five. 37%| seventy seven. 04%| Timesinterestearned| -| 1 . 00 times| Fundeddebttonetworkingcapital| sixty one. 80%| 63. 49%| Efficiency| Averagecollectionperiod| 4. 3 days| 44. 56 days| Inventoryturnover| 3. 98| 4. 43| Totalassetsturnover| 1 . 34| 1 . 11| Net worth turn over| 5. 47| 2 . 99| Networkingcapitalturnover| -87. 86| 40. 92| Profitability| Netprofitmargin| installment payments on your 42%| -0. 56%| Grossprofitmargin| 16. 11%| 7. 30%|
Returnontotalassets| 3. 27%| -0. 71%| ReturnonNetworkingcapital| 13. 28%| -48. 01%| Returnonnetworth| -213. 10%| -3. 26%| Ratios Analysis LIQUIDITY RATIOS: A liquidity ratio measures you’re able to send ability to shell out its expenses. The denominator of a fluidity ratio may be the company’s current liabilities, we. e., requirements that the firm must meet soon, usually with in twelve months. The numerator of a fluidity ratio is part or perhaps all of current assets. The latest ratio of Gul Ahmed for season 2010 is 0. ninety-seven and for 12 months 2009 it really is 0. 94. When we look at quick rate, the speedy ratio to get Gul Ahmed is zero. 39 in 2010 and zero. 44 in 2009.
It implies that Gul Ahmed had enough liquidity to meet its temporary liquidity want during the better economic situation as well as in worst economy. The aspect behind being well in it is liquidity rate is that business is very well managed in financing their assets. LEVERAGE RATIOS: The leverage ratios accomplish 2 things: First, they are really a way of measuring the level to which businesses finance estate assets through debts, second, they may be indicators with the financial likelihood of the organization.. We provides considered three leverage ratios for Gul Ahmed: total debt to total assets, occasions interest earned, and financed debt to net seed money.
Company’s datedness increased over the 2009-2010 intervals. The times’ interest attained ratio for Gul Ahmed during 2009 show that it is slightly reduced than the market average. While in 2010, Gul Ahmed’s time’s interest received ratio increased to, which has been higher than the industry typical of that year From this, it truly is concluded that the business has been capable of meet their interest obligations from funds available via operations during 2010. The comparatively reduce funded financial debt to net working capital proportion for Gul Ahmed implies that it follows the sector practice of heavily utilizing credit lines in banks.
It appears that the company did not have sensible funds to meet its financed debt payments although it can be performing a lot better than the industry. Taking, the preceding leverage ratios in considerations, it might be concluded that Gul Ahmed is highly leveraged and a lot of it is assets are financed by current debts. EFFICIENCY PROPORTIONS: Ratios are normally used to evaluate how well a company uses its property and liabilities internally. Efficiency Ratios can easily calculate the turnover of receivables, the repayment of liabilities, the amount and using equity and the general utilization of inventory and machinery.
The standard collection period is definately not the typical and that shows a loose credit term policies in receiving the payments late although somehow the standard collection period reduces close to median in2010 explaining the advance in acquiring payments. The inventory is kept at good level by ensuring well-timed supplies to its consumers.
The net seed money turnover is usually far above the median telling that the firm’s current assets are sufficiently utilized in producing substantial sales. Nevertheless , the net worthTurnover being below the median explains to that the Gul Ahmed can be bit high on using financial debt financing and less efficient in using value financing. EARNINGS RATIOS: Revenue margin is usually 2 . 42% (2010) and 0. 57% (2009). This reflects the firm’s bureaucratic efforts in controlling the market segments acceptance of the firms product, the effectiveness of the marketing and product sales efforts and the firms overall reputation.
The profit margin can be improving therefore the companies profitability is definitely improving. Come back on total assets= a few. 27% (2010) and 0. 59% (2009) this reflects the earnings productivity of the total assets. In this article there is a growth. This is because the firm is extremely profitable in terms of its assets are concerned. Go back on net working capital=13. 28% (2010) and installment payments on your 50% (2009) reflects earnings ofmanagerial decisions regarding investments in net current assets. This really is improving in a way that the company is definitely generating profits on the net seed money as compared to the year 2003. AL-Karam Textiles
Financial Ratios Ratios| 2009| 2010| Liquidity Ratios| | | Current Ratio| 1 ) 04| zero. 97| Speedy Ratio| zero. 4757| 0. 2787| Leveraging Ratios| | | Debts to advantage ratio| zero. 7381| 0. 80179| Funded to net working capital| 0. 3692| 1 . 365| Efficiency Ratios| | | Average collection period| 30days| 35days| Products on hand Turnover| zero. 7089| 0. 008109| Total Asset turnover| 0. 000933| 0. 000693| Net Worth Turnover| 2 . 15| 2 . 56| Net working capital turnover| -0. 0017583| -0. 010899| Profitability Ratio| | | Profit Margin| 0. 0078| 0. 0075| Return on Total Assets| 0. 6885| zero. 53351| Go back on Net Worth| 0. 1792| zero. 853| Come back on net working capital| -0. 1643| 0. 08387| Equity Ratio| | | Price to earning Ratio| 2 . 11| 2 . 01| Dividend payout| 0. 41| 0. 83| Book value per share| $15. 12| $19. 48| Ratios Analysis Liquidity ratios A) Current ratio: Total current assets/Total current liabilities is 0. 97(2010) and 1 . 04(2009). This talks about that this year the debts were outweighing the possessions however the earlier year the asset started to be more than the debts and hence the ratio is greater than 1 . b) Quick rate: (Total current assets-inventories)/total current liabilities is usually 0. 2787(2010) and 0. 4757(2009).
This kind of ratio is definitely taken out to be able to check the fluidity of the organization. When the inventory was subtracted from the total current resources, it provided us a figure of all the current property other than the stock. This kind of figure was divided by total current liabilities which gave us a significant decrease in the overall determine value as compared to the current percentage. However , the ratio is usually decreasing down the line in 2010. This means that the stocks have increased. Leverage proportions A) Total debt to total assets proportion: Total debt/total assets sama dengan 0. 80179(2010) and0. 7381(2009). This tells us about the number of assets which are debt loaned.
This means that within the last one year there has been a rise in the amount of assets which are being borrowed by financial debt and hence decrease in the ones which have been financed simply by equity. b) Funded debt to net working capital: Funded debt/net operating capital=1. 365(2010) and0. 3692 (2009). This kind of basically points out the ratio of personal debt which has a maturity of more than twelve months divided by the difference involving the current assets and current liabilities. Consequently the ability in the firm to retire its funded financial debt using offered relatively investment funds available has increased. Efficiency ratios A) Inventory yield ratio
The inventory turn over ratio can be 0. 008109 (2010) and 0. 7089(2009). It is a proportion which explains to the powerful inventory management policies. Lately, the proportion has lowered in worth than the prior one. Possibly the company has a lot of inventory or its product sales are reducing. b) Total assets proceeds The total property turn over rate of the two year is definitely 0. 000693(2010) and zero. 000933(2009). This can be a measure of the firm’s total effectiveness in generating revenue. The decrease in this percentage is not really significant enough. However , this shows that the firm’s efficiency in making sales from assets is usually decreasing to some degree. ) Net working capital yield = zero. 010899(2010) and -0. 0017583(2009). It is a way of measuring the firm’s productivity in generating sales. Again below the business performance is definitely decreasing in a way that the ratio of transformation of the net working capital to sales is definitely decreasing. Yet , even this difference can be not very significant between both of these years. Profitability ratios A) Profit perimeter =0. 0078(2010) and zero. 0075(2009). This kind of reflects the firm’s bureaucratic efforts for controlling the market’s acceptance from the firms item, the effectiveness of it is marketing and sales efforts plus the firms overall reputation.
The net income margin can be improving therefore the businesses profitability is improving. b) Return on total resources =0. 53351(2010) and 0. 6885(2009). This kind of reflects the earnings productivity with the total assets. Here there is also a decrease. This is because the firm is not so profitable in terms of its resources are concerned. c) Return upon net operating capital=-0. 08387(2010) and -0. 1643(2009). This kind of reflects the profitability of bureaucratic decisions concerning investments in net current assets. This is increasing in a way that the business is creating profits on its net working capital as compared to2009.
Collateral ratios A) Price to earnings ratio=2. 01(2010) and 2 . 11(2009). This is essentially a way of measuring the desirability of a organization. The more attractive a firm is always to the buyer the higher the P. Electronic ratio they have. The G. E percentage is a bit decreasing. It is because the ratio of earning per reveal to cost per share is better in 2009. The higher this rate the more attractive it is to the investors. B) Debt toequity ratio=0. 3481(2010) and zero. 4937 (2009) shows a decrease inthepreceding year2010. Bottom line Ratios| Gul Ahmed| Al karam| | Liquidity| Current Ratios| zero. 97| 1 . 04|
Quick Ratio| 0. 39| 0. 4757| Power | Total debt to perform Assets ratio| 73. 37%| 73. 81%| Funded personal debt to network capital| 61. 80%| thirty-six. 92| Efficiency| | | Average collection period| 43 days| 30 days| Inventory turnover| three or more. 98| zero. 7089| Total assets turnover| 1 . 34| 0. 000933| Net worth turnover| 5. 47| 2 . 15| Net working capital turnover| -87. 86| -0. 0017583| Profitability| | | Net earnings Margin| 2 . 42%| zero. 78| Come back on net worth| -213. 10%| 18. 92| Go back on Total Assets| several. 27%| six. 88%| Returning on Net Working capital| 13. 28%| -0. 1643| Equity| | | Cost to earning ratio| six. 5| 12. 85| Publication value every share| 19. 48| twenty one. 45| The ratio evaluation of the two companies displays the result that Al-karam has been increasing the equity as well as profitability and showing indications of an efficient business. On the other hand, Gul Ahmed is definitely decreasing it is business and going toward loss Fluid Ratios: Al-karam has a bigger Current percentage as well as Trial ratio since compare to Gul Ahmed which means it is in a better condition to meet it is current obligations and recieve more inventories. Gul Ahmed as a result has reduce margin safety to meet its current requirement.
Efficiency Ratios: Al-karam appears to be in a better financial position as out-do its performance. The company provides a lower turnover ratio pertaining to both, the assets and the inventory showing high amount of sales and performance as compare to Gul Ahmed. Profitability Ratios: Al-Karam has been rising in the profitability consistently, showing advancements in return about net worth and return on total possessions. Equity: Collateral ratios are primary interest to the business’s stockholders and include the price to earnings rate, dividend payout, and book value per share.
The cost to revenue ratio, commonly referred to as the P/E rate, is an overall measure of the desirability with the firm. The more attractive the firm is always to the investors, the higher the P/E ratio. The PRICE TO EARNINGS ratio is highest of Al Karam that is 10. 65 which is higher than the other fabric ratio, then comes Gul Ahmed. Al-karam has been displaying improvements inside the dividend yield and the publication value per share. This shows that the organization has been increasing its equity by including more investors in its foundation. The company therefore shows signs of expansion and higher perception of dedication towards obtaining more of the business.
The book value every share can be highest of Al Karam.. Bibliography http://www. gulahmed. com/investor_financial_information. html http://www. gulahmed. com/downloads/annual_reports/AnnualReport2012. pdf http://www. gulahmed. com/investor_financial_information. html http://download-reports. blogspot. com/2009/10/financial-analysis-ratio-analysis-of_2826. html http://www. gulahmed. com/downloads/annual_reports/Annual_Report_2009. pdf http://www. facebook. com/l. php? u=http%3A%2F%2Fwww. alkaram. com%2Fpsl%2FHalf%2520Yearly%2520Financial%2520Information%2520December%25202011. pdf&h=zAQGDqpbt http://www. scribd. com
