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Vision
To be a leading national enterprise with global aspirations, effectively
Pursuing multiple growth opportunities, maximizing returns to the stakeholders, remaining socially and ethically
responsible.
Mission
To provide our customers with premium quality products in a safe, reliable, Efficient and environmentally sound manner,
deliver exceptional services and customer support, maximizing returns to the shareholders through core business and
diversification, providing a dynamic and challenging environment for our employees.
Introduction to prtoject
Pakistans economy is an agricultural based and its importance is well established in the country. It plays an important
and vital role in the growth of the economy, its activity, generating revenues/foreign exchange and in the development of
the industrial sector of the country. It provides raw material to the industrial sector of the country like sugar, cotton,
textile, foods, jute, tobacco and other industries and regarded as a backbone of the Pakistan s economic activity. It is
contributed almost 21% of the Pakistans GDP and employs about 41% of the total labor force. Fertilizers have played an
important role in the growth and development of the agricultural sector especially to meet the growing demand of the food
and to achieve the self sufficiency level. Keeping the importance of fertilizer sector in my mind, I have choosen fuiji
fertilizer company for my project of financial Ratio Analysis.
Introduction to Problem:
Stock investing and consistency in financial performance requires careful analysis of financial data to find out the
company's true worth. This is generally done by examining the company's profit and loss account, balance sheet and cash
flow statement. This can be time-consuming and cumbersome. An easier way to find out about a company's performance
is to look at its financial ratios.
Research question
Whether companys performance is consistent to make investment in the company?
Objective:
Ratio analysis is an integral part of the financial statement analysis and it is most widely and powerful tool used to analyze
the companys financial statements. The main objective of ratio analysis is to deeply analyze the information provided in
the financial statements and present meaningful results in terms of liquidity, solvency, activity and profitability of the
company in a relative form.
Hence, the main objective of the project is to facilitate all the stakeholders especially the investors and bankers to evaluate
the ability that how effectively and efficiently it manages its operations and resources/assets and to know the activity
position of the selected company. This Project will also state the reasons that why the company are able and not able to
manage their assets effectively. The Project will also enable the investors and the other stakeholders to make the decision
to invest.
Significance
The project will provide very significant, rich and valuable information for all the stakeholders, financial analysts and the
students as well. Study of the project will become enable to identify the company past and current performance with
respect to the management of their resources and further will lead them to paint the future growth of the company on the
bases of the facts, figures and analysis provided in the project within the limit of financial ratio. This project will give
them solid analysis in a graphical and tabular form with an interpretation and conclusion drawn on bases of facts and
figures and allow them to take decision whether it is better to invest.
Data Source
Data Collection Sources
This project is based upon the primary sources of data and logic is that annual reports or company statements are treated
as secondary source of data and the whole project is based on companys annual reports and financial statements.
Secondary Sources Companys annual accounts report and their official sites has been consulted and used as a secondary
source to collect the basic and necessary information like financial statements, company profile, introduction, business
activity, and their vision and mission statements. Articles, books, stock exchange, brokers and different sites has also been
considered as secondary source available on the internet or in a physical form to collect the raw data and information as
much as possible on the topic selected in order to get a nice and comprehensive shape of the project.
Increase in Assets
Current assets include trade debts, stock,short term investments and cash & bank balances. With an aggregate balance of
Rs.35.88 billion at the end of 2014, the assets recorded an increase of Rs. 20.97 billion since 2009, mainly on account of
increase in short term investments, under Company policy for placement of surplus funds in term deposits for generation
of incremental.
Current liabilities
Current liabilities of the Company increased from Rs. 17.86 billion in 2009 to Rs. 53.82billion in 2014, primarily on
account of retained GIDC obligations, increase in short term borrowings and customer advances which is fairly in line
with the Companys growth and changes in its operating cycle.
Non-current liabilities
Total non-current liabilities comprising of long term loans, deferred taxation and long term portion of compensated leave
absences, have remained fairly constant during the past 6 years. Long term loans reduced by Rs. 1.78 billion during the
year on account of repayment ,while deferred liabilities increased by 12% compared to 2013. Long term financing has
been utilized for asset
Methodology
Ratios simply mean a number expressed in terms of another. A ratio is a statistical yardstick by mean of which relationship
between two or various figures can be compared or measured. Thus Ratio Analysis shows the relationship between
accounting data. Ratio can be found out by dividing on number by another number. Ratio analysis is an important and age
old technique of financial analysis. Following are some of the advantages of ratio analysis.
Advantages:
It simplifies the comprehension of financial statements.
Ratios tell the whole story of changes in the financial condition of the business.
It provides data for inter-company comparison. Makes inter-company comparison possible
Ratio analysis also makes possible comparison of the performance of different divisions of the company. The ratios are
helpful in deciding about their efficiency or otherwise in the past and likely performance in the future.
Ratios highlight the factors associated with successful and unsuccessful company. They also reveal strong companies and
weak companys, over-valued under-valued companies.
It helps in planning and forecasting. Ratios can assist management, in its function of forecasting, planning, co-ordination,
control and communications.
It helps in investment decisions in the case of investors and lending decisions in the case of investors and lending
decisions in the case of bankers etc.
2. Liquidity Ratios
I.
II.
III.
IV.
Current Ratio
Quick Ratio
Cash flow from operation to sales
Cash to Current liabilities
2014
%
38.29
2013
46.36
70
2012
2011
48.47
62.2
2010
43.6
2009
43.3
2008
40.4
2007
35.59
2006
32.42
2005
36.06
62.2
60
50
40
46.36
48.47
43.6
43.27
38.29
40.4
35.59
32.42
36.06
30
20
10
0
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
The gross margin is not an exact estimate of the company's pricing strategy but it does give a good indication of financial
health. Without an adequate gross margin, a company will be unable to pay its operating and other expenses and build for
the future. In general, a company's gross profit margin should be stable. It should not fluctuate much from one period to
another, unless the industry it is in has been undergoing drastic changes which will affect the costs of goods sold or
pricing policies.
Ways to improve Gross Profit Margin Ratio
Reducing Cost of Goods Sold
Cheaper Raw material
Net Profit
Net Sales
Ratio
NPM
45
40
35
30
25
20
15
10
5
0
2014
%
22.37
2013
27.03
2012
28.07
2011
40.73
2010
24.58
2009
24.4
2008
21.33
2007
18.86
2006
15.48
2005
19.22
40.73
27.03
28.07
24.58
22.37
2014
2013
2012
2011
2010
24.4
2009
21.33
2008
18.86
2007
15.48
2006
19.22
2005
Net 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.
Ways to improve Net Profit Margin Ratio
Reducing Cost of Goods Sold
2014
32.3
2013
39.5
2012
41.78
2011
60.06
2010
36.35
2009
36.11
2008
32.82
2007
27.49
2006
23.26
2005
28.31
Higher pretax margins are desirable and indicative of management's ability to keep operating costs low. Investors and
analysts typically evaluate a company's pretax margin over time, looking for an increase in the measure. When drawing
conclusions about the relative performance of a company, benchmark comparisons should be made with competitors in
the same industry.
PTM
70
60
50
PTM
40
30
20
10
0
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Ratio
EBITD
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
35.61
42.74
44.99
63.64
41.43
41.68
37.99
32.36
27.99
33.00
70
60
50
40
30
20
10
0
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Ratio
ROE
2014
%
70.79
2013
80.05
120
80.96
2011
99.17
2010
71.4
2009
67.4
2008
53.11
2007
42.11
2006
35.78
2005
39.36
99.17
100
80
2012
70.79
80.05
80.96
71.4
67.44
53.11
60
40
42.11
35.78
39.36
2006
2005
20
0
2014
2013
2012
2011
2010
2009
2008
2007
Shareholder's equity does not include preferred shares. Widely used by investors, the ROE ratio is an important measure
of a company's earnings performance. The ROE tells common shareholders how effectively their money is being
employed. In general, financial analysts consider return on equity ratios in the 15-20% range as representing attractive
levels of investment quality.
Return on Capital Employed (ROCE)
The return on capital employed (ROCE) ratio, expressed as a percentage, complements the return on equity (ROE) ratio
by adding a company's debt liabilities, or funded debt, to equity to reflect a company's total "capital employed".
Comparing net income to the sum of a company's debt and equity capital, investors can get a clear picture of how the use
of leverage impacts a company's profitability. Financial analysts consider the ROCE measurement to be a more
comprehensive profitability indicator because it gauges management's ability to generate earnings from a company's total
pool of capital.
Ratio
ROC
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
64.5
68.41
70.38
88.6
57.25
50
36.94
34.81
32.76
90
80
70
60
50
40
30
20
10
0
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
36.49
Return on Assets
Return on assets is the ratio of annual net income to average total assets of a business during a financial year. It measures
efficiency of the business in using its assets to generate net income.
ROA =
Ratio
ROA
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
-0.05
2014
20.99
2014
2013
2013
29.68
2012
2012
34.38
2011
40.5
2010
25.61
2009
22.89
2010
2009
2008
2011
2008
20.44
2007
2007
18.33
2006
2006
16.9
2005
17.21
2005
Liquidity Ratios
Liquidity ratios analyze the ability of a company to pay off both its current liabilities as they become due as well as their
long-term liabilities as they become current. In other words, these ratios show the cash levels of a company and the ability
to turn other assets into cash to pay off liabilities and other current obligations.Liquidity is not only a measure of how
much cash a business has. It is also a measure of how easy it will be for the company to raise enough cash or convert
assets into cash. Assets like accounts receivable, trading securities, and inventory are relatively easy for many companies
to convert into cash in the short term. Thus, all of these assets go into the liquidity calculation of a company.
Current ratio:
CR known as liquidity ratio and working capital ratio, shows the proportion of current assets of a business in relation to its
current liabilities
Current Ratio
Current Assets
Companies would aim to maintain a current ratio of at least 1 to ensure that the value of their current assets cover at least
the amount of their short term obligations. However, a current ratio of greater than 1 provides additional cushion against
unforeseeable contingencies that may arise in the short term.
Current ratio must be analyzed over a period of time. Increase in current ratio over a period of time may suggest improved
liquidity of the company or a more conservative approach to working capital management. A decreasing trend in the
current ratio may suggest a deteriorating liquidity position of the business or a leaner working capital cycle of the
company through the adoption of more efficient management practices. Time period analyses of the current ratio must
also consider seasonal fluctuations.
Ratio
CR
2014
Proportion
2013
0.67
0.77
2012
1.14
2011
2010
1.04
2009
0.86
2008
0.84
2007
0.82
2006
0.94
2005
0.9
0.91
Current ratio for 2014 depicted a minimal decrease of 0.10 times as compared with 2013 due to increase in trade
creditors.
.
1.14
1.2
1
0.8
0.6
0.4
0.2
0
1.04
0.67
2014
0.86
0.77
2013
2012
2011
2010
0.84
2009
0.82
2008
0.94
2007
0.9
2006
0.91
2005
Quick Ratio, also known as Acid Test Ratio, shows the ratio of cash and other liquid resources of an organization in
comparison to its current liabilities.
Quick Ratio=
Ratio
QR
2014
0.59
2013
0.66
2012
1.01
2011
0.93
2010
0.73
2009
0.66
2008
0.54
2007
0.68
2006
0.61
2005
0.69
1.2
1
0.8
0.6
0.4
0.2
0
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Cash to current liabilities and cash flow from operations / sales witnessed an increase of 0.04 times and 0.06 times
respectively
Quick ratio is a measure of a company's ability to settle its current liabilities on a very short notice. Current ratio may
provide a misleading indication of a company's liquidity position when a considerable portion of its current assets is
illiquid. Quick ratio is therefore a more reliable measure of liquidity for manufacturing companies and construction firms
that have relatively high levels of inventory, work in progress and receivables.
Assets Turnover Ratio
Ratio
ATR
Times
2014
2013
2012
117.11
111.96
117.1
2011
149.5
4
2012
2011
2010
2010
125.9
2009
2008
103
2007
58.73
118.8
2006
105.6
150
100
50
0
2014
2013
2009
2008
2007
2006
2005
2005
137
2014
0.36
29090
81240
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
-10000
2013
0.34
25270
74481
2012
0.25
18646
74323
2011
0.35
19558
55221
2010
0.33
14769
44874
2009
0.25
8918
36163
2008
0.27
8166
30593
2007
0.21
5914
28429
2006
-0.01
-396
29951
2005
0.24
6177
25481
Cash Flow
Sales
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Activity Ratios
Inventory Turnover
A ratio showing how many times a company's inventory is sold and replaced over a period. The days in the period can
then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory
turnover days."
Ratio
ITOR
2014
Times
148
2013
188
2012
152
2011
162
2010
283
2009
236
2008
55.20
2007
25.54
2006
29.31
2005
47.47
300
200
100
0
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
No of Days in inventory
A ratio showing how many times a company's inventory is sold and replaced over a period. The days in the period can
then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory
turnover days."
Ratio
NDI
2014
Days
2013
2
2012
2
2011
2
2010
2
2009
1
2008
2
2007
7
14
2006
12
2005
8
No of Days in inventory
14
12
10
No of Days in inventory
8
6
4
2
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Ratio
DTR
2014
2013
107
2012
35
2011
40
248
2010
146
2009
96.1
2008
27.58
2007
2006
21.19
36.95
2005
24.65
100
50
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
debtors pay quickly, it helps cashflow and reduces the risk of customers not paying the money they owe. The calculation
for debtors collection period is as follows:
Debtors Collection Period
365
It's inefficiency or activity ratio that measures how many times a business can turn its accounts receivable into cash
during a period. In other words, the accounts receivable turnover ratio measures how many times a business can collect its
average accounts receivable during the year.
Ratio
2014
DTR
2013
2012
2011
2010
2009
2008
2007
2006
2005
Day
s
11
13
17
10
15
10
5
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
While debtor turnover days improved in comparison with last year and were consistent with the historic average of
3 days over the past 6 years
Ratio
2014
CTR
2013
2012
2011
2010
2009
2008
2007
2006
2005
Time
s
124
144
61
33
60
55
49.13
50.58
27.32
19.44
Number of days in payables stood at 124 times due to non-payment of GIDC under various Court
decisions.
80
60
40
20
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Day
s
11
13
19
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Ratio
FATR
2014
4.04
2013
4.04
2012
4.15
2011
3.24
2010
2.82
2009
2.58
2008
2.4
2007
2.74
2006
3.12
2005
2.77
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Has made a large investment in fixed assets, with a time delay before the new assets start generating revenues
Has invested in areas that do not increase the capacity of the bottleneck operation, resulting in no additional
throughput
2009
2008
2007
2006
2005
6.94
5.18
3.62
3.46
3.41
10
5
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
As a result of decline in profits, the Companys earnings per share was recorded at Rs. 14.28 per share. Price to
earnings ratio however improved by 1.13 times as compared to 2013 as the market price of Companys share rose
from Rs. 111.96 at the close of 2013 to Rs. 117.11 for the year ended December 31, 2014.
Dividend yield Ratio
Dividend yield is the ratio of dividend per share to current share price. It is a measure of what percentage an investor is
earning in the form of dividends.
Dividend Yield = Dividend per Share/Current Share Price
Rati
o
DYR
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
11.99
13.77
12.29
16.51
14.24
14.93
13.57
9.43
8.07
11.39
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Comments:
It gives a handsome amount of dividend to shareholder.
Rs
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
117.11
111.96
117.14
149.54
125.86
102.93
58.73
118.75
105.55
137
100
50
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Ratio
CDP
S
Rs
2014
13.65
2013
15.35
2012
15.5
2011
20
2010
13
2009
13.15
2008
13.75
2007
11
2006
10
2005
12
10
5
0
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Bonus Share
A bonus share is a free share of stock given to current shareholders in a company, based upon the number of shares that
the shareholder already owns While the issue of bonus shares increases the total number ofshares issued and owned, it
does not change the value of the company.
Rati
o
BS
2014
2013
2012
2011
2010
2009
2008
2007
2006
50
25
10
40
2005
-
2014
2013
2012
4/9
2/3
3/5
2011
2010
2009
2008
2007
2006
1/3
3/7
2/5
2005
1/3
A low debt-to-equity ratio indicates lower risk, since debt holders have fewer claims on the company's assets. A higher
debt-to-equity ratio, on the other hand, shows that a company has been aggressive in financing its growth with debt, and
there may be a greater potential for financial distress if earnings do not exceed the cost of borrowed funds.
Ratio
2014
EBIT
31.91
2013
39.91
2012
32.08
2011
43.2
2010
16
2009
14.82
2008
2007
15.44
12.1
2006
14.94
2005
23.13
40
20
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Comments:
Financial leverage ratio of 0.62 times for2014 is consistent with the average for the past 6 years. Debt to equity
ratio improved to 9:91 indicating the lowest amount of long-term debt in the last 6 years. Companys interest cover
ratio doubled to 32 times in comparison with 15 times in 2009 as result of lower finance cost to profitability ratio .
Conclusion
So,in the light of all the details given above about the financial analysis of FFC i.e Debt to equity, Liquidity and
profitability of FFC, we come to know that FFC has performed well even in shortage of Gas supply in the country. It is
consistently growing and paying higher rate of return to investor.