NED University of Engineering and

Technology- MEM (Energy Management)

Section: A

Term Project
Finanical Accounting and
Management
Course Instructor: M. Faizan
Yaqoob

1. Muhammad Umair, 2. Danish Qamar, 3.

Owais Kafeel, 4. Arsalan Ahmed, 5. Adnan
Arian

Acknowledgement
Nothing concentrate can be achieved without an optimum combination of inspiration
and preparation. No work can be accomplished without guidance of experts. It is only
the intellectual genius that can transfer a product into a quality product.
I own this movement of satisfaction & deep guidance to Mr. Faizan Yaqoob my Financial
Accounting and Management teacher for imparting the knowledge whenever required
& for giving a wide view of concepts.

Table of Contents

1. Introduction to Company
2. SWOT Analysis
3. Board of Directors
4. Balance Sheet
5. Profit & Loss Account
6. Ratio Analysis
7. Graphs
8. Recommendation
9. Conclusion

Introduction to company
Kay Chemicals:
The Company was incorporated in Pakistan on December 8, 1981 as private limited company. The
principal activity of the company is indenting Business. Production plant and head office is situated in
Karachi.

Gulf Chemicals:
Gulf Chemicals Private Limited established in the year 1993. Production plant and head office is situated
in Karachi. Over the years, the company expanded significantly and built warehouses and application
laboratories in Karachi, Kasur and Sialkot. Gulf is also marketing products of several European
Companies and also enjoys technical collaboration with these companies. Many of their products are
produced in Gulf Chemical Plant under their guidance and according to European standards.
GULF is also operating a well-equipped tannery, under the name Gulf Leather Works Private Limited,
where Gulf technicians take full advantage of a running tannery and are conducting bulk trials of new
products, which are developed by Gulf laboratory research and development department.

SWOT Analysis of Company of Kay Chemical:

Strength:
High turnover of receivable which can eventually increase the option and potential to increase standard
and productivity
Weakness:
Took a long time to enter the highly productive and blooming chemical manufacturing market. As a
result the company lost a lot of its once huge market share.
Opportunities:
Expansion in collaboration with Multinational companies to improve quality and to offer wide range of
products
Threats:
Low Cost manufacturing and import from Chinese companies and other competitors

Board of directors of Kay Chemical:

The current members of the Board are listed below:

Mr. Abdul Majid

Mrs. Rahima Majid
Mrs. Nighat Sultana
Mrs. Nuzhat Sultana
Mrs. Tehseen Majid

KAY CHEMICALS (PRIVATE) Limited

Balance Sheet
As On June 30,2013

Equity & Liabilities

2013 (Rs)

2012 (Rs)

Share Capital and Reserves

Authorized Capital
2,000 Ordinary Shares of Rs. 1000/- each
Issued, Subscribed & Paid up Capital
Accumulated profit

Current Liabilities
Trade & other payables
Provision for taxation

Total Equity & Liabilities

200,000

200,000

1,101,000
313,640
1,414,640

1,101,000
249,454
1,350,454

331,584
265,760
597,344

75,251
214,267
289,518

2,011,984

1,639,972

113,674

133,735

203,977
604,105
1,090,228

89,642
559,629
856,966

1,898,310

1,506,237

2,011,984

1,639,972

Assets
Non-Current Assets
Property, Plant & Equipment
Current Assets
Trade Debts
Advances & Deposits
Cash and bank balances

Total Assets

GULF CHEMICALS (PRIVATE) LIMITED

Balance Sheet
As At June 30, 2013

Equity & Liabilities

2013 (Rs)

2012 (Rs)

Share Capital and Reserves

Authorized Capital
1,000,000 (2011:1,000,000) ordinary shares of Rs.10 each
Issued, Subscribed & Paid up Capital
Unappropiated Profit

Non Current Liabilities

Subordinated Loan
Liability against assets subject to finance lease
Provision for gratuity
Current Liabilities
Trade and other payables
Short term loan - unsecured
Current maturity of liability against assets
subject to finance lease
Provision for taxation

Total Equity and Liabilities

10,000,000

10,000,000

5,000,000
35,357,954
40,357,954

5,000,000
30,819,522
35,819,522

30,000,000
1,475,505
6,232,575
37,708,080

30,000,000
2,302,859
6,085,938
38,388,797

36,800,893
216,186,962

37,145,707
234,004,000

827,354
2,227,169
256,042,378

1,427,202
2,792,706
275,369,615

334,108,412

349,577,934

14,601,882
1,269,450
831,906
16,703,238

17,020,402
1,508,700
920,702
19,449,804

Assets
Non-Current Assets
Property, Plant & Equipment
Long term deposits
Deferred Tax

Current Assets
Stock in trade
Trade debtors - unsecured considered good
Advances and deposits
Short term prepayments and
balances with statutory authorities
Income tax refundable
Cash and bank balances

Total Assets

88,050,770
133,735,208
574,965

140,205,640
117,954,029
2,612,419

72,485,101
3,492,018
19,040,113
317,378,175

56,736,900
3,139,383
9,479,759
330,128,130

334,081,413

349,577,934

KAY CHEMICALS (PRIVATE) Limited

Profit & Loss Account (Income Statement)
As On June 30,2013
2013 (Rs)

2012 (Rs)

Revenue Receipt

5,315,190

4,285,338

Administrative Expenses
Financial Charges

4,969,247
10,687
4,979,934

4,649,379
14,465
4,663,844

335,256
335,256

(378,506)
750,000
371,494

5,310
265,760

214,267

64,186

157,227

Accumulated Profit/ (Loss) B/F

249,454

92,227

Accumulated Profits C/F

313,640

249,454

Other Income

Taxation
Prior
-Current
Profit after Taxation

GULF CHEMICALS (PRIVATE) LIMITED

Profit & Loss Account (Income Statement)
As At June 30, 2013
2013 (Rs)
Sales
Cost of Sales
Gross Profit

2012 (Rs)

319,358,141
(257,621,992)
61,736,149

279,270,585
(223,945,165)
55,325,420

19,454,867
34,622,685
286,286
(54,363,838)

17,643,911
28,803,193
321,513
(46,768,617)

7,372,311

8,556,803

7,372,311

48,284
8,605,087

Workers' profit participation fund

Workers' welfare fund

(368,615)
(130,530)
(499,145)

(430,254)
(162,106)
(592,360)

Profit before Taxation

6,873,166

8,012,727

(2,334,732)
4,538,434

(3,107,116)
4,905,611

Administrative and general expenses

Selling and distribution expenses
Finance cost

Operating Income
Other Income
Profit before statutory provisions

Taxation
Profit after Taxation

KAY CHEMICALS (PRIVATE) Limited

Balance Sheet
As On June 30,2013

Equity & Liabilities

Common Sized Balance Sheet

for Kay Chemicals

2013 (Rs)

2012 (Rs)

2013 (Rs)

2012 (Rs)

200,000

200,000

10%

12%

1,101,000
313,640
1,414,640

1,101,000
249,454
1,350,454

55%
16%
70%

67%
15%
82%

331,584
265,760
597,344

75,251
214,267
289,518

16%
13%
30%

5%
13%
18%

2,011,984

1,639,972

100%

100%

113,674

133,735

6%

8%

203,977
604,105
1,090,228

89,642
559,629
856,966

10%
30%
54%

5%
34%
52%

1,898,310

1,506,237

94%

92%

2,011,984

1,639,972

100%

100%

Share Capital and Reserves

Authorized Capital
2,000 Ordinary Shares of Rs. 1000/- each
Issued, Subscribed & Paid up Capital
Accumulated profit

Current Liabilities
Trade & other payables
Provision for taxation

Total Equity & Liabilities

Assets
Non-Current Assets
Property, Plant & Equipment
Current Assets
Trade Debts
Advances & Deposits
Cash and bank balances

Total Assets

GULF CHEMICALS (PRIVATE) LIMITED

Balance Sheet

Common Sized
Balance Sheet for
Gulf Chemicals

As At June 30, 2013

Equity & Liabilities

2013 (Rs)

2012 (Rs)

10,000,0
00

10,000,0
00

5,000,00
0
35,357,9
54
40,357,9
54

5,000,00
0
30,819,5
22
35,819,5
22

30,000,0
00
1,475,50
5
6,232,57
5
37,708,0
80

30,000,0
00
2,302,85
9
6,085,93
8
38,388,7
97

36,800,8
93
216,186,
962

37,145,7
07
234,004,
000

827,354
2,227,16
9
256,042,
378

1,427,20
2
2,792,70
6
275,369,
615

334,108,
412

349,577,
934

2013
(Rs)

2012
(Rs)

Share Capital and Reserves

Authorized Capital
1,000,000 (2011:1,000,000) ordinary shares of
Rs.10 each

Issued, Subscribed & Paid up Capital

Unappropiated Profit

3%

3%

1%

1%

11%

9%

12%

10%

9%

9%

0.4%

1%

2%

2%

11%

11%

11%

11%

65%

67%

0.2%

0.4%

1%

1%

77%

79%

100%

100%

Non Current Liabilities

Subordinated Loan
Liability against assets subject to finance
lease
Provision for gratuity

Current Liabilities
Trade and other payables
Short term loan - unsecured
Current maturity of liability against assets
subject to finance lease
Provision for taxation

Total Equity and Liabilities

Assets
Non-Current Assets
Property, Plant & Equipment
Long term deposits
Deferred Tax

14,601,8
82
1,269,45
0
831,906
16,703,2
38

17,020,4
02
1,508,70
0
920,702
19,449,8
04

88,050,7
70
133,735,
208
574,965

140,205,
640
117,954,
029
2,612,41
9

72,485,1
01
3,492,01
8
19,040,1
13
317,378,
175

56,736,9
00
3,139,38
3
9,479,75
9
330,128,
130

334,081,
413

349,577,
934

4.4%

4.9%

0.4%
0.2%

0.4%
0.3%

5.0%

5.6%

26.4%

40.1%

40.0%

33.7%

0.2%

0.7%

21.7%

16.2%

1.0%

0.9%

5.7%

2.7%

95.0%

94.4%

100%

100%

Current Assets
Stock in trade
Trade debtors - unsecured considered good
Advances and deposits
Short term prepayments and
balances with statutory authorities
Income tax refundable
Cash and bank balances

Total Assets

KAY CHEMICALS (PRIVATE) Limited

Profit & Loss Account (Income Statement)
As On June 30,2013
2013 (Rs)

2012 (Rs)

2013 (Rs)

2012 (Rs)

Revenue Receipt

5,315,190

4,285,338

100%

100%

Administrative Expenses
Financial Charges

4,969,247
10,687
4,979,934

4,649,379
14,465
4,663,844

93%
0.2%
94%

108%
0.3%
109%

335,256

(378,506)
750,000
371,494

6.3%
6.3%

8.8%
17.5%
8.7%

0.1%
5.0%
5.1%
1.2%

0.0%
5.0%
5.0%
3.7%

5.9%

5.8%

Operating Income
Other Income
Profit before Taxation
Taxation
Prior
-Current
Total Tax
Profit after Taxation

335,256

(5,310)
(265,760)
(271,070)
64,186

(214,267)
(214,267)
157,227

Accumulated Profit/ (Loss) B/F

249,454

92,227

Accumulated Profits C/F

313,640

249,454

GULF CHEMICALS (PRIVATE) LIMITED

Profit & Loss Account
As At June 30, 2013
2013 (Rs)
Sales
Cost of Sales
Gross Profit

2012 (Rs)

2013 (Rs)

2012 (Rs)

319,358,141
(257,621,992)
61,736,149

279,270,585
(223,945,165)
55,325,420

100%
81%
19%

100%
80%
20%

19,454,867
34,622,685
286,286
(54,363,838)

17,643,911
28,803,193
321,513
(46,768,617)

6.1%
11%
0.1%
17%

6.3%
10%
0.1%
17%

7,372,311

8,556,803

2.3%

3.1%

7,372,311

48,284
8,605,087

0.0%
2.3%

0.0%
3.1%

Workers' profit participation fund

Workers' welfare fund

(368,615)
(130,530)
(499,145)

(430,254)
(162,106)
(592,360)

0.1%
0.04%

0.2%
0.06%

Profit before Taxation

6,873,166

8,012,727

2.2%

2.9%

(2,334,732)
4,538,434

(3,107,116)
4,905,611

0.7%
1.4%

1.1%
1.8%

Administrative and general expenses

Selling and distribution expenses
Finance cost
Total Expenses
Operating Income
Other Income
Profit before statutory provisions

Taxation
Profit after Taxation

KAY CHEMICALS (PRIVATE) Limited

Ratio Analysis

2013

2012

Return on Equity (NI/Avg SE)

22%

18%

Total Asset turnover (Sales/Avg TA)

2.64

2.61

Gross Profit Margin (GP/Sales)

0.06

-0.09

Return on Asset (NI/Avg TA)

16%

15%

Current Ratio (CA/CL)

3.18

5.20

Return on Asset (EBI/Avg TA)

17%

23%

Financial Leverage (Avg TA/Avg SE)

3.37

5.66

26.06

47.8

Avg. Collection Period (Days in year/Rev. TO)

14.0

7.6

Return on Sales (EBI/Sales)

6.3%

8.7%

Receivable Turnover (Sales/Receivables)

GULF CHEMICALS (PRIVATE) LIMITED

Ratio Analysis

2013

2012

Return on Equity (NI/Avg SE)

11%

14%

Total Asset turnover (Sales/Avg TA)

0.96

0.80

Gross Profit Margin (GP/Sales)

0.19

0.20

Return on Asset (NI/Avg TA)

1.5%

1.4%

Current Ratio (CA/CL)

1.24

1.20

Return on Asset (EBI/Avg TA)

2.1%

2.3%

Financial Leverage (Avg TA/Avg SE)

1.05

1.25

Receivable Turnover (Sales/Receivables)

8.68

7.52

Avg. Collection Period (Days in year/Rev. TO)

42.1

48.5

Return on Sales (EBI/Sales)

2.2%

2.9%

Graphical Illustration:

Return on Equity
25%
20%
15%

KAY CHEMICALS
(PRIVATE) Limited

10%

GULF CHEMICALS
(PRIVATE) LIMITED

5%
0%
2013

2012

Total Asset Turnover

3.00
2.50
2.00
1.50

KAY CHEMICALS
(PRIVATE) Limited

1.00

GULF CHEMICALS
(PRIVATE) LIMITED

0.50
0.00
2013

2012

Return on Asset
18%
16%
14%
12%
KAY CHEMICALS
(PRIVATE) Limited

10%
8%

GULF CHEMICALS
(PRIVATE) LIMITED

6%
4%
2%
0%
2013

2012

Current Ratio
6.00
5.00
4.00
3.00

KAY CHEMICALS
(PRIVATE) Limited

2.00

GULF CHEMICALS
(PRIVATE) LIMITED

1.00
0.00
2013

2012

Receivable Turnover
60.00
50.00
40.00
30.00

KAY CHEMICALS
(PRIVATE) Limited

20.00

GULF CHEMICALS
(PRIVATE) LIMITED

10.00
0.00
2013

2012

Return on Sales
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%

KAY CHEMICALS
(PRIVATE) Limited
GULF CHEMICALS
(PRIVATE) LIMITED

2013

2012

Recommendation
In comparison with Gulf chemicals, Kay Chemicals is a much better option with reference to return on
investment which can also be seen from above mentioned graphs of Ratios. But along with high return
of Kay Chemical we should not neglect that its Current ratio depicts a drastic decline which shows that
Kay Chemical is drastically increasing its Liabilities it can be because of recent expansion for which Kay
Chemical made a huge investment but if that would have been the case PP&E of Kay chemical Balance
sheet would have increased but we can see that instead of increasing it decreased in 2013.
On other note Gulf chemical is an average but more stable company with Asset to Liability ratio almost
equal to one. But with much stable and constant rate of profit, Thus final verdict about any of the
company cannot be given; Investors should get answers which were raised from Ratio analysis from
both of the companies.

Conclusion
Further analysis in comparisons with each other as well as other competitor companies for both of the
companies is needed. Till then one can opt for less predictive but probably more profitable Kay Chemical
Pvt. Ltd. Or can opt for predictive and stable Gulf Company Pvt. Ltd. for comparatively less profit
(return).
This report just portray the previous years profitability, efficiency, Turnover analysis of both the
companies one only predict or forecast the coming years profitability based on analysis of previous
years data but real profitability always is dependent on policies for each company which can never be
predicted before time.