Академический Документы
Профессиональный Документы
Культура Документы
Group Members
Raheel Shaukat
MBE 103027
Rameez Raza
MBE 103004
Naeem Nazir
MBE 103007
Table of Contents
Abstract
Introduction
1)Companies Introduction
2)AFS
3)Users of Financial Statements
4)Why doing Analysis
5)Analysis with respect to users
Methodology
1)Ratio Analysis
2) Horizontal Analysis
3) Vertical Analysis
4)Trend Analysis
5)Earning Management
6)Z- Score
Results
Conclusion
Abstract:
This report includes analysis of financial statements with the help of Ratio
analysis. Horizontal analysis, Vertical analysis trend analysis, Trend analysis,
Trend analysis , Earning management and Z-Score.
With the help of different analysis we are in a position to give a
clear view about the companies financials with every perspective. We are
able to assess and make decision about the actual worth of company and
what things are needed to be adjusted in its operations.
Introduction
The Financial Statements are used to provide information to its stakeholders.
It represents the financial position of any organization and help management
while taking financial decisions. There are number of International
Accounting Standards which are being followed while making or keeping
accounting records. The Analysis of financial statements helps it
stakeholders to judge the financial position of that company, and every
individual stakeholder utilize the information according to its requirements.
There are tangible and non-tangible stakeholders every one use the
information according to its interest and requirements, so we can say that
analysis and use of financial statements is not limited to analysts, however,
managers, auditors, regulators, suppliers, distributers and educators also
benefited from the insights of analytical techniques.
Objective of the project :
SCOPE:
The scope of this project is not limited however we are working on 9
companies, even though this project succeeds lots of knowledge for us. The
knowledge is based on the financial assessment analytically, and making
financial decision in better way that helps in future to the business.
The scope of this research project is to analyze the performance of the
selected companies in relation with the profitability. The scope of this
research focuses on the enhancement of understanding of financial reporting
in order to facilitate improved decision-making.
Significance of Project
The worth of the project can be measured as that every business in the world
utilizes these sources and techniques to make the financial decisions while
analyzing the performance. For students this project is worth more or having
more significance because it contains the experience of doing analytical
assessment of financial sector.
Companies Introduction
Following are the companies we selected for analysis.
1)
2)
3)
4)
5)
6)
7)
8)
9)
HinoPak Limited:
Hinopak Motors Limited assembles, manufactures and markets world
renowned Hino diesel trucks and buses in Pakistan. The Company has held
the top position in the domestic market for medium and heavy-duty vehicles
for 17 consecutive years and is highly acclaimed for quality and
technological excellence.
Backed by Hino's expertise Hinopak has achieved standard of
quality and excellence that rival the best in the region. With over 60,000
vehicles on road, Hinopak has gained 65% market share making it the
largest manufacturer in medium and heavy-duty truck and bus industry in
Pakistan.
HinoPak's product range has been designed and built in Hino's
traditions of automotive excellence to be the leader in its category and the
main emphasis has been given to passengers' safety & comfort.
PIA:
Pakistan International Airlines Corporation (commonly known as PIA, is
the flag carrier airline of Pakistan. The airline has its head office on the
grounds of Jinnah International Airport in Karachi and operates scheduled
services to 24 domestic destinations and 38 international destinations in 27
countries across Asia, Europe and North America. Its main bases are at
Karachi, Lahore and Islamabad/Rawalpindi. PIA has been ranked as a 3-star
airline by Skytrax, the world's official airline and airport review
Lenders
Managers
might need segmental and total information to see how they fit into
the overall picture
Employees
Suppliers and
other trade
creditors
Customers
Financial analysts they need to know, for example, the accounting concepts
employed for inventories, depreciation, bad
debts and so on
Environmental
groups
Researchers
LIQUIDITY
Methodology:
Current Ratio
C. A / C. L
The completion of the project is depends on methods and techniques, before applying those
2
methods we required some data. We take the data of 9 listed non-Financial Companies for 5
Absolute Quick Ratio
Q. A A / R /C.L
years and assumed these companies of the same industry. However the following methodology is
Profitability Ratios
used in building the project.
4 Net Profit Margin
N.P / Sales
5 Gross profit Margin
G.P / Sales
6 Operating Profit Ratio
O.P / Sales
Data
analysis
Techniques:
O.E / Sales
7 Operating Expense Ratio
on Equity
N.I after tax / Sh. E
8 Return
The
process of analysis includes the calculation of following financial parameters/standards in
on Capital employed
9 Return
order
to measure
the performance of the selected companies; N.I / T.A C.L
N.I / T.A
1 Return on Assets
0 Financial Ratios
Common size analysis
Index analysis
Trend Analysis
Earning Management
Z-score model
Financial Ratios
A tool used by individuals to conduct a quantitative analysis of information in a company's
financial statements. Ratios are calculated from current year numbers and are then compared to
previous years, other companies, the industry, or even the economy to judge the performance of
the company.
Activity Ratios
12
13
14
15
T.S / T.A
C.S / Avg. D
360 / D.T.O
C.P / Avg. C
16
17
18
19
20
360 / C.T.O
COGS / Avg. Inv
Inventory Turnover
Inventory Turnover in Days
Operating Cycle
Cash Cycle
360 / I.T.O
I.T.O in Days+ D.T.O in Days
O.C C.T.O in Days
Solvency Ratios
21
22
Debt to Equity
Long Term Debt to Total Assets
23
L. D / Sh. E
L. D / T.A
L. D / Sh. E + L.D
BASED ON USER
Interpretation of Ratios:
The ratio and their interpretation is given in the next page in detail.
Item of Interest
Common Size Ratio
=
Reference Item
The ratios often are expressed as percentages of the reference amount. Common size statements
usually are prepared for the income statement and balance sheet, expressing information as
follows.
EARNINGS MANAGEMENT
Earnings Management occurs when managers use judgment in financial reporting and in
structuring transactions to alter financial reports to either mislead some stakeholders about the
underlying economic performance of the company, or to influence contractual outcomes that
depend on reported accounting numbers.
From Discretionary Accruals calculations we identify that which company is managing its
earnings, It means that the company whose Discretionary accruals are more near to 0 is least
managing its earnings,
For 2010
Interc
ept
X
Varia
ble 1
X
Varia
ble
2
0.557
68
0.557
68
0.557
68
0.557
68
0.557
68
0.557
68
0.557
68
0.557
68
-
0.311
02
0.311
02
0.311
02
0.311
02
0.311
02
0.311
02
0.311
02
0.311
02
-
Companies
Sui Southern Gas
Company Limited
0.1460
626
HinoPak Limited
0.1460
626
PIA
0.1460
626
Murry Brewerry
Limited
0.1460
626
0.1460
626
Crestex Textile
0.1460
626
0.1460
626
Wyeth Pakistan
Limited
Kohat Industries
0.1460
626
0.1460
in
sales* ppe*c
coef of oef
sales
0.1112
55
0.0771
37
0.0612
5
0.0506
8
0.0836
2
0.0003
1
0.0036
8
0.0829
2
-
NDA
DA
0.002
93
0.052
3
0.260
24
0.14
23
0.088
37
0.004
9
0.075
6
0.001
6
0.173
18
0.170
92
AB
S
0.1
42
0.20
68
0.01
97
0.2
07
0.1
45
0.144
18
0.14
52
0.07
58
0.17
45
0.024
04
0.166
43
0.05
8
0.0
58
0.006
97
-
0.070
12
-
0.07
82
-
0.0
78
0.0
0.090
47
0.013
2
0.0
2
0.0
76
0.1
75
Limited
Interpretation
626
0.557
68
0.311
02
0.0836
2
0.075
6
0.013
2
0.07
58
76
Industry Average of earning management is 0.108 all the companies whose discretionary
accruals are near are less managing earnings however others are doing more. Results and
Discussion
We have analyzed 9 companies out of which SSGPL is performing well whose ROCE
is 3.65, N.P 4.03, Murry Brewery is also performing well whose ROCE is 2.33, N.P 6.63,
there operating expenses are less than industry there Return on assets is more. As
there return ratios are high its good but their solvency ratios are needed to be
decreased as it is above the industry.
Companies we chose were from different sectors therefore there is huge
fluctuation in the ratios. Companies may be performing better in their own industry but
showing different results here.
Conclusion
The main focus of our project is the analysis of companies performance. We are
mainly paying attention on the comparison of these analyzed companies with industry.
As we consider the industry a bench mark and standard of performance for all
companies. It is a part of our study; the course title is Analysis of Financial Statements
so the purpose of this is to practically make the analysis so the objective of the course is
achieved. For the completion of the project we find the data through internet web site of
the companies.
For practical implementation of the work we selected the 9 Non-financial
companies from the We select those companies randomly from the Karachi stock
exchange web site above companies. The methodology we used in making the analysis
is the Horizontal Analysis, Vertical Analysis, Ratio Analysis, Earning Management model
and Z-Score Model.