Reportfinancialanalysis 170115152934

Analysis of Financial Statements
of
Al-Karam & Gul Ahmad Textile Industry
(2011-2015)
Muhammad Ahmad
Muhammad.ahmad5013@gmail.com
Ali Jan
Alijan049@gmail.com
Syed Hassaan Ali

syedhassaanaliji@gmail.com
Preface
T
his report provides the analysis of financial statement of the last five years of two
companies Gul Ahmad Textile Mills & Al-karam Textile Mills (Pakistan Synthetics
Limited). It encompasses all the knowledge of the financial statements of the firms and
also include the words about the trends and behaviors of the company. To understand the general
behavior of companies of the textile industrial sector of Pakistan.

Acknowledgement
We would like to express our deepest appreciation to all those who provided us the possibility to
complete this report. A special gratitude we give to our Ma’am, Ms. Quratul Ain Benish, whose
contribution in stimulating suggestions and encouragement, helped us to coordinate our
assignment especially in writing this report.
Furthermore we would also like to acknowledge with much appreciation the crucial role of the
Institute of Management Sciences, who gave the permission to use all required equipment and
the necessary materials to complete the task “Financial Analysis”. A special thanks goes to our all
team mates, Mr. Muhammad Ahmad, Mr. Syed Hassaan Ali and Mr. Ali Jan, who have invested
their full efforts with their professional skills and perform their tasks in the productive and most
effective manner to accomplish this assignment of Analysis of Financial Statements. Last but not
least, many thanks go to our all classmates, who make it possible by their support, encouragement
and their guidance.

Contents
Introduction: ................................................................................................................................................. 5
History of Al-Karam Textile Mills: ............................................................................................................. 6
History of Gul Ahmad Textile Mills: .......................................................................................................... 7
Ratios Calculations: ....................................................................................................................................... 9
Ratio Analysis .............................................................................................................................................. 10
Net Working Capital ................................................................................................................................ 10
Current Ratio:.......................................................................................................................................... 11
Acid Test Ratio/Quick Ratio: ................................................................................................................... 12
Cash Ratio: .............................................................................................................................................. 13
Debt Ratio: .............................................................................................................................................. 14
Debt/Equity Ratio: .................................................................................................................................. 15
Debt/Tangible Net Worth: ...................................................................................................................... 16
Net Profit Margin: ................................................................................................................................... 17
Return on Total Equity: ........................................................................................................................... 18
Assets Turnover Ratio: ............................................................................................................................ 19
Return on Assets: .................................................................................................................................... 20
Operating Income Margin: ...................................................................................................................... 21
Gross Profit Margin: ................................................................................................................................ 22
Return on Investment: ............................................................................................................................ 23
Degree of financial Leverage: ................................................................................................................. 24
Earnings per Share: ................................................................................................................................. 25
Price/Earnings Ratio: ............................................................................................................................... 26
Dividend Yield: ........................................................................................................................................ 27
Percentage of Retained Earnings: .............................................................. Error! Bookmark not defined.
Dividend Payout: ........................................................................................ Error! Bookmark not defined.
Book Value per Share:............................................................................................................................. 28
Trend Analysis: ............................................................................................................................................ 29
Vertical Analysis (Profit & Loss Statement): ........................................................................................... 29
Vertical Analysis (Liabilities, Balance Sheet): .......................................................................................... 39
Vertical Analysis (Assets, Balance Sheet): ............................................................................................... 49
Horizontal Analysis:..................................................................................................................................... 54
Introduction:
Textiles is the most important manufacturing sector of Pakistan and has the longest production chain,
with inherent potential for value addition at each stage of processing, from cotton to ginning, spinning,
fabric, dyeing and finishing, made-ups and garments. The sector contributes nearly one-fourth of
industrial value-added, provides employment to about 40% of industrial labor force, and consumes about
40% of banking credit to manufacturing sector and accounts for 8% of GDP. Barring seasonal and cyclical
fluctuations, textiles products have maintained an average share of about 54% in national exports.
However, despite being the 4th largest producer and 3rd largest consumer of cotton globally, Pakistan’s
comparative advantage diminishes due to export of low value added textiles products.
The development of the textiles sector in Pakistan was dictated by the quantitative restrictions imposed
by developed countries under the MFA and ATC, resulting in structural anomalies and lopsided capacities.
While the spinning sector grew quickly, the highest value added sector – woven garments – failed to
attract adequate investment due to non-availability of quotas in this sector. At the same time, the fabric
sector remained in the non-mill sector with the bulk of production is coming from inefficient small power
loom units. The overall technological configuration of the industry needs major up-gradation for replacing
that machinery which has become obsolete or has outlived its economic life. In addition, clusters need to
be developed and sustained through structured interventions, especially in the SME sector.
The textile industry has also suffered for lack of adequate infrastructure facilities which are so desperately
needed for its smooth operations. Apart from absence of exclusive areas dedicated to textiles production,
energy has emerged as a major issue especially in the Punjab where approximately 65% of the industrial
units are located. Skilled manpower is also significantly deficient with the result that the sector is suffering
from low per capita productivity. The physical and institutional infrastructure, especially at sea and dry
ports, requires revamping and reform. Likewise, numerous parallel and overlapping regulations add to
management and production costs.
On the other hand, the post-quota environment brought challenges of its own, as an uneven playing field
was created as many developed countries granted unilateral concessions and preferential treatment to a
number of textiles and clothing exporting countries of their choice. Now, with the award of GSP+ status
to Pakistan in 2014, the prospects for enhanced market share have improved. Pakistan has natural
comparative advantages of home-grown fibers and availability of relatively cheap labor that can be
effectively converted to competitive advantages through appropriate policy interventions.
Two companies have chosen for the analytical review of financial statements,
1. Al-Karam Textile Mills (Pakistan Synthetic Limited)

2. Gul Ahmad Textile Mills
History of Al-Karam Textile Mills:

The Group has its origins in the early 1900s when it started the trade of grains and oil in the subcontinent.
Entrepreneurial skills and acumen have always been the driving force behind the success of the Group.
Based in Karachi, the Alkaram Group has unfolded its vision of growth and established its multifaceted
concerns countrywide and abroad. Following opportunities in the newly created state of Pakistan, the
Group ﬂourished in the fields of textiles, F & B, salt mining, hospitality, trading and distribution.
A melting pot of skilled employees and advanced technology, Alkaram has been brushed upon the wall of
success using a simple formula; short lines of communication were kept, along with consistently quick yet
well thought-out decisions by managers that have been part of the Alkaram mix since the start. In using
this simple philosophy, we have ensured that the identity of Alkaram has not been lost along the way and
that the ladder of success we have been climbing has been leaning against the right wall. Soon the Group
became the largest business family of the country by creating the most modern textile units that went on
to become household names of the country.
Alkaram Textile Mills Pvt. Ltd. founded in 1986 as a vertically integrated composite textile mill, Alkaram is
a household name when it comes to Fashion Fabrics. Alkaram Textile mills creates everything from shower
curtains to apparel for men and women.
The Retail Arm of the Group
Realising the growth in retail, the Group's vision is to become the largest modem retailer by providing mid
to upper markets brands to fulﬁll customer needs. With customer needs at the forefront, we have created
private brands and have franchised international specialty brands to bring the best retail experience and
value for our customers.
1. Alkaram Studio
Building on the strength of Alkaram Textiles, the concept was created for customers to experience the
depth, range and creativity of the Alkaram product portfolio. From fashion fabrics and apparel to kids-
wear, home textiles, to home-ware needs, Alkaram Studio is a complete creative concept where
customers can realize their dreams and aspirations. Alkaram Studio is a perfect heaven for aesthetically-
inclined women. You can get close to the originality of the style with fashion fabrics, ready-to-wear lines
and stunning accessories. It enables you to create your own clothes and accessorize with all the material
you need.
2. BabyShop
With 132 stores across the region, Babyshop is part of Landmark Group, the largest retail conglomerate
of the Gulf region. Babyshop is a complete store for all your kids' needs, one stop.
3. LifeStyle
With focus on modern women's personal and home improvement needs, Lifestyle offers the best brands
under one roof for cosmetics, fashion accessories, home decor, furnishing and lighting. Lifestyle has 108
stores in the region and has become the consumers' first choice.
4. Splash
Another concept from Landmark Group, Splash is focused on youth fashion. It offers a complete product
mix catering to avant garde customers' needs of street-wear and trendy clothes.
5. Mango
Mango requires no introduction as it is one of the largest women's fashion brands of Europe and is
renowned across the world. With several stores planned across the nation, it is soon to become a
household name for the elegant Pakistani fashion scene.
History of Gul Ahmad Textile Mills:

The story of textiles in the subcontinent is the story of Gul Ahmed. The group began trading in textiles in
the early 1900s. The group entered in the field of manufacturing with the establishment of today’s iconic
name of Gul Ahmed Textile Mills Ltd in the year 1953. Since its listing on the Karachi Stock Exchange in
1970, the company has been making rapid progress and enjoying a leading position in the world of textiles.
With an installed capacity of more than 130,000 spindles, 300 state-of-the-art weaving machines and most
modern yarn dyeing, processing & stitching units, Gul Ahmed is a composite unit – making everything
from cotton yarn to finished products. Gul Ahmed has its own captive power plant comprising of gas
engines, gas & steam turbines, and backup diesel engines. Believing in playing its role in protecting the
environment, Gul Ahmed has also set up a waste water treatment plant to treat 100% of its effluent,
bringing it to NEQS levels.
Gul Ahmed is playing a vital role not only as a textile giant, but has its strong presence in the retail business
as well. The opening of its flagship store – Ideas by Gul Ahmed– marked the group’s entry into the retail
business. Starting from Karachi, Gul Ahmed now has an extensive chain of more than 40 retail stores
across the country, offering a diverse range of products from home accessories to fashion clothing. More
than 50 years since its inception, the name Gul Ahmed is still globally synonymous its quality, innovation
& reliability.
Subsidiary Companies
 GTM USA Corporation (FZC) – (100% owned subsidiary of Gul Ahmed Textile Mills Ltd)
 Gul Ahmed International Ltd. (FZC) – (100% owned subsidiary of Gul Ahmed Textile Mills Ltd)
 GTM Europe Ltd (FZC) – (100% owned subsidiary of Gul Ahmed Textile Mills Ltd)
Business Activities
Excellence in quality and service is the hallmark of all operations performed at Gul Ahmed. Firmly standing
by its business values, Gul Ahmed is active in manufacture and sale of textile products.
The manufacturing wing is an essential component in Gul Ahmed’s operations. The manufacturing cycle,
which includes spinning, weaving, processing, designing and stitching, results in an end product that is
tailored to the most stringent customer requirements.
On the retail front, Ideas by Gul Ahmed offers fabrics and made-ups, ranging from home accessories to
clothing. It not only provides fashion at great value, but also caters to various customer needs by offering
a diverse product mix. This leads to a complete and enjoyable retail experience. As a result of this, the
chain has expanded to 40 stores across Pakistan since its inception in 2003.
Ratios Calculations:
Ratio Analysis
Net Working Capital
NET WORKING CAPITAL

1000000
890272
800000 756447
666101
600000
480615
422030 431438
400000 371067
216427
200000
125869
-97802
-200000
1 2 3 4 5
Alkaram 125869 431438 480615 371067 216427
GulAhmad 422030 -97802 666101 890272 756447
Explanation:
Positive NWC of a company express that a company invest its long term debts in the short term assets. So
that is why the capital of Al-Karam is positive in all five years. But if we analyze the net working capital of
Gul Ahmad its show that in second year which is 2012 they invest its short term debts in the fixed assets
so that is why in second year net working capital shows negative because they have less current assets
then the current liabilities, so we can say here they are in technically insolvent in the second year but next
they change their strategy and maintain more current assets then the current liabilities. “Net working
capital have positive correlation with profitability of textile industry.” (Working Capital Management and
Corporate Performance of Textile Sector in Pakistan, Muzaffar Asad, 2012).
Current Ratio:
CURRENT RATIO
1.40
1.20
1.00
0.80
1.31 1.30
0.60 1.20 1.15
1.09 1.05 1.06 1.05
1.03 0.99
0.40
0.20
0.00
1 2 3 4 5
AlKaram 1.09 1.31 1.30 1.20 1.15
GulAhmad 1.03 0.99 1.05 1.06 1.05
Explanation:
Current Ratio is an indicator of the capability of the firms to pay their current liabilities by converting
current assets. It also known as liquidity ratio. Generally more than one ratio is acceptable. The current
ratio of whole textile industry is less than one mean current ratio with textile industry in Pakistan is 1.50.
If we compare industrial average with both companies we can find Al-Karam is more capable to pay their
short term debts.
Al-karam Textile industry take the benefits of musharika and mudarbah financing from the banking
companies. Other one is they borrow the short term financing from the banks for the purpose of imports
of goods from other countries.
Acid Test Ratio/Quick Ratio:
Acid Test Ratio

0.70
0.59 0.60 0.59 0.58

0.60
0.55
0.50
0.40
0.30 0.27
0.24 0.25
0.20 0.21
0.20
0.10
0.00
1 2 3 4 5
AlKaram 0.59 0.60 0.55 0.59 0.58
GulAhmad 0.20 0.24 0.27 0.21 0.25
Explanation:
Acid test ratio is also called quick ratio which indicates that how more quickly we satisfy our short term
liabilities then current ratio. In current ratio there is an element of inventory which is not convertible in
to cash with least time so we eliminate it and get to know our liquidity without inventory. Usually 1.00 is
acceptable for the acid test ratio. Industrial Average Ratio of Acid Test Ratio is 0.62. By the analyzing the
graph we can examine that Al-Karam has a good acid test ratio than the Gul Ahmad. Gul Ahmad Textile
Industry has a least Acid Test Ratio because the volume of inventory of Gul Ahmad is high than the Al-
Karam Textile Industry.
Al-karam has a less portaionate of Inventory in their current assets. So that is why they have not so much
difference between the current ratio and acid test ratio rather than the Gul Ahmad Textile who have a
hug amount of inventory in their current assets so that is why Gul Ahmad’s Acid test ratio become lower
than the Al-Karam acid test ratio.
Cash Ratio:
Cash Ratio
0.35
0.30
0.29
0.25
0.20
0.17
0.15 0.15
0.13
0.10 0.09 0.10

0.09
0.07
0.05
0.03 0.03
0.00
1 2 3 4 5
AlKaram 0.29 0.15 0.09 0.17 0.13
GulAhmad 0.03 0.03 0.07 0.09 0.10
Explanation:
Cash Ratio is indicate that how much cash a company retain with itself to satisfy the current liabilities with
the cash. So that is why normal ratio which is acceptable for the creditors a cash ratio is 0.50. in the graph
we can see that in the first year Al-Karam has a least cash ratio then the Gul Ahmad but after that Al-
Karam has a greater cash ratio then the Gul Ahamd because from the start of our analysis we examine in
the balance sheets that Gul Ahmad not retain much cash with itself but Al-Karam retain more cash with
their selves to satisfy their creditors.
Gul Ahmad carry low amount of cash with itself they carry their huge part of investment in the form of
inventory, so that is why Gul Ahmad has a low Cash Ratio. But in the case of Al-Karam Textile in the first
two year they have a large amount of cash in their current assets but having less part in the other elements
of current assets. So in the FY 2011 & FY 2012 they have a high cash ratio but after that they carry less
cash in hand so their cash ratio drop to the 0.13 as compared to the FY 2012 Cash Ratio was 0.29.
Debt Ratio:
Debt Ratio
20000000
18000000
17617304
16000000 15691806 15760428
14000000
13246249
12000000
10000000
8558828
8000000
6000000
4000000
2000000 1936192 1983843 2181270

1477533 1747443
0
1 2 3 4 5
AlKaram 1477533 1936192 1983843 2181270 1747443
GulAhmad 15691806 13246249 15760428 17617304 8558828
Explanation:
Debt ratio is indication of percentage of assets financed by the creditors and its owners and it’s used to
determine how well they are protected in case of insolvency. If company fail to protect its creditor then
it may become impossible to borrow more money. Usually SECP required that 40% investment must be
contributed by the owner and he can borrow 60% of its total equity from the lenders. In debt ratio there
are all the assets short/long term.
Debt/Equity Ratio:
Debt/Equity Ratio
3.50 3.33
2.96 2.90
3.00
2.65
2.50
2.00 1.87
1.80 1.78
1.52
1.50 1.27
1.19
1.00
0.50
0.00
1 2 3 4 5
AlKaram 1.27 1.80 1.78 1.87 1.52
GulAhmad 3.33 2.96 2.90 2.65 1.19
Explanation:
The debt ratio indicates the firms long term debt paying ability total liabilities includes short term liabilities
reserves deferred tax liabilities non-controlling interest redeemable preferred stock and any non-current
liability it doesn’t include shareholder equity. Basically debt ratio indicates the percentage of assets
financed by the creditors and it helps to determine how well creditors are protected in case of insolvency.
If creditors are not well protected the company is not in a position to issue additional long term debt from
the perspective of long term debt paying ability the lower this ratio the better the company’s position.
The computation of the Debt/Equity Ratio is conservative because all the liabilities are included, and
shareholder equity is understated at the extent that assets have a value greater than the book value.
Similarly to the debt ratio, debt/equity ratio also indicates that the GulAhmad is enhancing its debt paying
ability by reducing its debt/equity ratio. And AlKaram debt/equity ratio moderately decreasing which
indicates the increment in the total debts of the company.
Debt/Tangible Net Worth:
Debt/Tangible Networth
4.00
3.50
3.36
3.00 2.98 2.92

2.65
2.50
2.00
1.80 1.87
1.78
1.50 1.52
1.27 1.20
1.00
0.50
0.00
1 2 3 4 5
AlKaram 1.27 1.80 1.78 1.87 1.52
GulAhmad 3.36 2.98 2.92 2.65 1.20
Explanation:
The formula for debt to tangible net worth is total debt divided by tangible net worth. In general, a
lower ratio is better. A low ratio means the business has lots of tangible assets relative to the
amount of debt it holds. If the ratio is increasing, that means either the company is taking on more
debt and liabilities or is losing cash and assets. Creditors are hesitant to lend to a business with
a high ratio because that means they are less likely to recoup their loan value in the event of a
liquidation.
Debt/Tangible net worth is more conservative approach as compared to previous debt paying
ability determining approaches. In which intangible assets (goodwill, trademark, etc.) are also
excluded from the shareholder equity, to make sure the actual long term debt paying ability in
case of liquidation. Like the debt ratio and debt/equity ratio, debt/tangible net worth also shows
the same results that AlKaram’s debt to tangible net worth is increasing which indicates that its
long term debt paying ability decreasing moderately. On the other hand GulAhmad improving its
position of the debt paying ability by reducing its debt. Especially remarkable reduction in the debt
in the last year of the company.
Net Profit Margin:
Net Profit Margin

0.08
0.07 0.07
0.06
0.05
0.05
0.04
0.04
0.03
0.02
0.02
0.02
0.01 0.01 0.01

0.00422
0.00
-0.01
-0.01 -0.01
-0.02
1 2 3 4 5
AlKaram 0.07 0.00422 0.01 0.01 -0.01
GulAhmad 0.05 -0.01 0.02 0.04 0.02
Explanation:
Net Profit Margin is an indication of utilization of revenue which is earned through generating the sales.
In this ratio companies examine that how much they bear cost to generate the sales and after that what
portion of their revenue save with them. In sales firstly we bear the cost of goods manufacture and sold
then there is other costs like administrative expenses and selling expenses which are also deductible from
the revenue of sales then taxation and interest paid is deducted and after all these activities we have net
income. And we check the portion that how much we now save.
Both companies Al-Karam & Gul Ahmad shows the same behavior in 2012 by abrupt decline in the profit
margin. But having the different causes, Al-Karam decline its profit margin due to the remarkable
increment in the cost of goods sold and operating expenses of the company. On the other hand Gul Ahmad
declined its profits margins due to the hug level of financing cost in the form of long term finance & short
term murabaha.
Return on Total Equity:
Retun on Total Equity

0.30
0.25 0.25
0.25
0.20
0.19
0.15
0.13
0.10
0.08
0.05
0.04 0.04
0.02
0.00
-0.01
-0.05 -0.05
-0.10
1 2 3 4 5
AlKaram 0.25 0.02 0.04 0.04 -0.01
GulAhmad 0.25 -0.05 0.13 0.19 0.08
Explanation:
Return on total equity indicated that how much a company earn on the total invested amount by both
owner and the creditors. Its shows that is firm utilize its resources to maximize its profit.
Return on total equity shows return to both common and preferred stock holders as we discussed earlier
in the previous ratio that net income in the FY 2012 declined rapidly so there will be little earning available
for the both common stock and preferred stock. Even in the case of Gul Ahmad total net income declined
till the extent of loss.
Assets Turnover Ratio:
Assets Turnover Ratio

16.00
14.00 13.80
12.00
10.00
8.00
6.00
4.00
2.00 2.12
1.57 1.46
1.41 1.65 1.43
1.36
1.25
0.53
0.00
1 2 3 4 5
AlKaram 1.57 1.46 1.65 1.43 0.53
GulAhmad 1.25 1.41 13.80 1.36 2.12
Explanation:
It measure the activity of assets and ability of the firm to generate sales through use of the assets. Al
Karam showed stable assets turnover ratio without any huge differences among the different years. But
on the other side gul Ahmad shoed the abnormal behavior in FY 2013 due to huge increment in the net
sales of the company which caused by the addition of the newly assets or plant which come into
operations.
Return on Assets:
Return on Assets
0.35
0.32
0.30
0.25
0.20
0.15
0.10 0.11
0.06
0.05 0.05
0.04
0.01 0.01
0.00 0.01
-0.0035
-0.01
-0.05
1 2 3 4 5
AlKaram 0.11 0.01 0.01 0.01 -0.0035
GulAhmad 0.06 -0.01 0.32 0.05 0.04
Explanation:
It describe firm ability to utilize its assets to create profit by comparing profits with the assets that
generate the profit. By the dupont return on assets, rate of return on assets can be broken down into two
component ratios the total asset turnover and net profit margin which are described earlier. Both
companies ratio decline due to the remarkable decline in the net income of the FY12. But after coming in
operations of the plant of Gul Ahmad, it came with the huge change in its ratio.
Operating Income Margin:
Operating Income Margin

0.20
0.18 0.18
0.16
0.14
0.12
0.11
0.10 0.10
0.08 0.08
0.07
0.06 0.06
0.06
0.05
0.05
0.04
0.04
0.02
0.00
1 2 3 4 5 6
AlKaram 0.11 0.06 0.04 0.05 0.18
GulAhmad 0.10 0.05 0.07 0.08 0.06
Explanation:
It is more conservative approach in nature. It includes only operating income while computing profit
margin. Due to the decline in the operating income of the both companies, both companies showing
decline in the FY12. But as installation of new asset or plant of the Gul Ahmad it come into higher operating
income margin for three years and then again decline due to the higher operating expenses.
In contrast of it Al Karam show decline in operating income margin for one more year and then in FY13
other operating expenses reduced due to which company attain a higher operating profit. Which causes
the higher operating income margin. And In the last year, higher sales and remarkable reduction in other
operating expenses causes the tremendous change in the operating income margin ratio.
Gross Profit Margin:
Gross Profit Margin

0.30
0.25
0.24
0.20
0.18 0.18 0.18
0.15 0.16
0.14 0.14
0.10
0.07
0.06
0.05 0.05
0.00
1 2 3 4 5
AlKaram 0.14 0.05 0.06 0.07 0.24
GulAhmad 0.18 0.14 0.16 0.18 0.18
Explanation:
Gross profit is the difference between the net sales revenue and cost of goods sold. Comparing gross
profit with the net sales is said to be gross profit margin. Gul Ahmad has the more stable gross profit
margin trend and increasing with the moderate manner. On other side Al Karam is declining in the first
year then three year increasing trend. In the last year company came forward with the rapid increase in
gross profit due to the increase in sale.
Return on Investment:
Return on Investment
0.45
0.40
0.38
0.35
0.30
0.28
0.25 0.26
0.23
0.20
0.15 0.15
0.14
0.10 0.10
0.08
0.05 0.05 0.05
0.00
1 2 3 4 5
AlKaram 0.23 0.05 0.08 0.10 0.05
GulAhmad 0.38 0.14 0.26 0.28 0.15
Explanation:
It is basically used to measure the income earned on the invested capital. ROI of both firms decreases on
the first year because of the decrease in net income.in the first year Al Karam cost of financing increased
due to the huge amount of long term finance. Which cause the low level of ROI. Gul Ahmad declined in
the first year because of low net income which caused by the higher operating expense. And then ROI of
both firms increased with the moderate pace for next three year.
Degree of financial Leverage:
Degree of Financial Leverage

10.00
8.91
8.00
6.00
4.00
2.53 2.61
2.00 1.87
1.03 1.04
0.95
0.00 -0.13 -0.03
-1.10
-2.00
1 2 3 4 5
AlKaram 1.03 -1.10 -0.13 -0.03 1.04
GulAhmad 2.53 8.91 1.87 2.61 0.95
Explanation:
The use of financing with a fixed charge (such as interest) is termed financial leverage. Financial leverage
is successful if the firm earns more on the borrowed funds than it pays to use them. It is not successful if
the firm earns less on the borrowed funds than it pays to use them. Using financial leverage results in a
fixed financing charge that can materially affect the earnings available to the common shareholders. Two
things are important in looking at financial leverage as part of financial analysis. First, how high is the
degree of financial leverage? This is a type of risk (or opportunity) measurement from the viewpoint of
the stockholder. The higher the degree of financial leverage, the greater the multiplication factor. Second,
does the financial leverage work for or against the owners? As shows in graph Gul-Ahmad enjoy more
degree of financial leverage as compared to ALKARAM.
Earnings per Share:
Earning Per Share

20.00
18.85
15.00
10.00
6.75
5.00 5.11
4.61
2.65
0.78 0.89
0.00 0.33
-0.18
-1.89
-5.00
1 2 3 4 5
AlKaram 5.11 0.33 0.78 0.89 -0.18
GulAhmad 18.85 -1.89 4.61 6.75 2.65
Explanation:
Earnings per share—the amount of income earned on a share of common stock during an accounting
period—applies only to common stock and to corporate income statements. Gul Ahmad have more
earning per share as compared to Alkaram. In 2012 due to market situation gulahmad face loss and
alkaram have heavy decline in profitability so that’s why in 2012
Price/Earnings Ratio:
Price/Earning Ratio
60.00 49.79
40.00
23.59
18.58 18.53
20.00 9.48
3.84
2.74 5.15
0.00 -11.15
-20.00
-40.00
-60.00
-80.00
-97.40
-100.00
-120.00
1 2 3 4 5
AlKaram 3.84 49.79 23.59 18.58 -97.40
GulAhmad 2.74 -11.15 5.15 9.48 18.53
Explanation:
Price to earnings ratio expresses the relationship between the market price of a share of common stock
and that stock’s current earnings per share. Al-Karam have more price to earnings ratio as compared to
Gul Ahmad but graph shows that after 2011 Gul Ahmad have continuous upward trends that shows
betterment in term growth of company financial condition.
Dividend Yield:
Dividend Yield
0.12
0.10 0.10
0.08
0.06 0.06
0.04
0.03
0.02 0.02
0.00 0.00 0.00 0.00 0.00

1 2 3 4 5
AlKaram 0.10 0.00 0.00 0.06 0.00
GulAhmad 0.00 0.00 0.00 0.02 0.03
Explanation:
The dividend yield indicates the relationship between the dividends per common share and the market
price per common share. In 1as year 2011 Al-Karam have 0.10 dividend yield and then in 2014 dividend
yield is 0.06 on the other hand Gul Ahmad have zero dividend yield and then in consecutive 2year have
more than zero.
Book Value per Share:
Book Value Per Share

80.00
74.24
70.00
60.00
50.00
40.00
35.23 35.63 36.43
30.00 31.37
20.00 20.82 19.15 19.94 20.82 20.50

10.00
0.00
1 2 3 4 5
AlKaram 20.82 19.15 19.94 20.82 20.50
GulAhmad 74.24 35.23 35.63 36.43 31.37
Explanation:
Book value per share indicates the amount of stockholders’ equity that relates to each share of
outstanding common stock.gulahmad have greater book valueper share as compared to alkaram.
Trend Analysis:
Vertical Analysis (Profit & Loss Statement):

Pakistan Synthetics Limited - Al-Karam Textile Mills ‘11
AlKaram Vertical Analysis '2011

6.89%
3.71%
0.23% 10.61%
10.83%
0.51%
3.79%
14.12% 85.88%
CGS GP S&A Cost Other Income Operating Pro Finance Cost Pro Before Tax Tax Pro After Tax
Explanation:
Vertical analysis shows that which operation takes how much portion of you revenue earned through the
sales of goods.
In the above vertical analysis of Al-Karam textile mills for FY 2011 shows that a hug amount of revenue is
allocated for cost of goods sold, around 85.88% of total revenue. Remaining part 14.12% is called gross
profit by which 3.79% allocated to the Selling & Administrative expenses. Some part is contributed by the
Other Income, 0.51% contributed by the Other Income. So 10.83% remaining part is called Operating
profit. From which company paid finance cost which is 0.23% of the sales. And EBIT part which is actually
a remaining part of revenue is now 10.61% and from that part company paid tax to the government and
the regulatory authorities which is 3.71% of the sales and at the end 6.89% of the sales company save
from its revenue as a Net Income. Which is distributed in two parts one is dividend if company is going to
pay any dividend to their shareholders and remaining part after the dividend is going to be the part of the
retained earnings. 85.88% portion of sales used by the cost of goods sold because of Inflation, Company
received raw material and other things which are used to produce the final good are at the high cost and
increasing rate of the labor wages caused to increase the cost of goods sold.

2.09% 0.92%
0.45% 0.50%
0.42%
2.50% 3.01%
5.06%
94.94%
Explanation:
Vertical analysis shows that which operation takes how much portion of your revenue, earned through
the sales of goods.
Other Income, 0.45% contributed by the Other Income. So 3.01% remaining part is called Operating profit.
From which company paid finance cost which is 2.09% of the sales. And EBIT part which is actually a
remaining part of revenue is now 0.92% and from that part company paid tax to the government and the
regulatory authorities which is 0.50% of the sales and at the end 0.42% of the sales company save from
its revenue as a Net Income. Which is distributed in two parts one is dividend if company is going to pay
any dividend to their shareholders and remaining part after the dividend is going to be the part of the
retained earnings.

0.86%
2.27% 1.31% 0.45%
0.27%
3.58%
2.76%
6.07%
93.93%
Explanation:
sales of goods.
retained earnings.
Alkaram Vertical Analysis '14

1.47% 0.43% 1.04%
4.49% 3.06%
0.04%
2.81%
7.30%
92.70%
Explanation:
sales of goods.
retained earnings.
1.60%
11.33%
9.73%
8.08%
76.12%
17.81%
1.48%
4.59%
23.88%
Explanation:
sales of goods.
In the above vertical analysis of Al-Karam textile mills for FY 2015 shows that a normal amount of revenue
is allocated for cost of goods sold, around 76.12% of total revenue. Remaining part 23.88% is called gross
Other Income, 1.48% contributed by the Other Income. So 17.81% remaining part is called Operating
profit. From which company paid finance cost which is 8.08% of the sales. And EBIT part which is actually
a remaining part of revenue is now 9.73% and from that part company paid tax to the government and
the regulatory authorities which is 1.60% of the sales and at the end 11.33% of the sales company save
from its revenue as a Net Income. Which is distributed in two parts one is dividend if company is going to
pay any dividend to their shareholders and remaining part after the dividend is going to be the part of the
retained earnings.
Gul Ahmad ‘11
GulAhmad Vertical Analysis '11

1.34%
4.70%
6.04%
4.32%
10.36%
0.10%
7.93%
81.81%
18.19%
Explanation:
sales of goods.
In the above vertical analysis of Gul Ahmad textile mills for FY 2011 shows that a normal amount of
revenue is allocated for cost of goods sold, around 81.81% of total revenue. Remaining part 18.19% is
called gross profit by which 7.93% of total revenue allocated to the Selling & Administrative expenses.
Some part is contributed by the Other Income, 0.10% of total revenue contributed by the Other Income.
So 10.36% of total revenue remaining part is called Operating profit. From which company paid finance
cost which is 4.32% of the sales. And EBIT part which is actually a remaining part of revenue is now 6.04%
of total revenue and from that part company paid tax to the government and the regulatory authorities
which is 1.34% of the sales and at the end 4.70% of the sales company save from its revenue as a Net
Income. Which is distributed in two parts one is dividend if company is going to pay any dividend to their
shareholders and remaining part after the dividend is going to be the part of the retained earnings.
Gul Ahmad ‘12

0.95% -0.96%
-0.01%
0.08% 5.49%
5.48%
8.74%
14.14%
85.86%
Explanation:
sales of goods.
In the above vertical analysis of Gul Ahmad textile mills for FY 2012 shows that amount of revenue is
profit by which 8.74% of total revenue allocated to the Selling & Administrative expenses. Some part is
contributed by the Other Income, 0.08% of total revenue contributed by the Other Income. So 5.48% of
total revenue remaining part is called Operating profit. From which company paid finance cost which is
5.49% of the sales. And EBIT part which is actually a remaining part of revenue is now -0.01% of total
revenue (Loss) and from that part company paid tax to the government and the regulatory authorities
which is 0.95% of the sales and at the end -0.96% of the sales company bear from its revenue as a Net
loss. Which is distributed in two parts one is dividend if company is going to pay any dividend to their
Gul Ahmad ‘13

0.46%
2.79% 2.32%
4.06%
0.13% 6.85%
8.84%
15.56%
84.44%
Explanation:
sales of goods.
In the above vertical analysis of Gul Ahmad textile mills for FY 2013 shows that an amount of revenue is
profit by which 8.84% of total revenue allocated to the Selling & Administrative expenses. Some part is
contributed by the Other Income, 0.13% of total revenue contributed by the Other Income. So 6.85% of
total revenue remaining part is called Operating profit. From which company paid finance cost which is
4.06% of the sales. And EBIT part which is actually a remaining part of revenue is now 2.79% of total
revenue and from that part company paid tax to the government and the regulatory authorities which is
0.46% of the sales and at the end 2.32% of the sales company save from its revenue as a Net Income.
Which is distributed in two parts one is dividend if company is going to pay any dividend to their
Gul Ahmad ‘14

0.79% 3.74%
4.53%
3.52%
0.71% 8.05%
10.76%
18.10% 81.90%
Explanation:
sales of goods.
Gul Ahmad ‘15

1.81%
2.35%
4.00% 0.53%
6.35%
1.03%
12.95%
18.27%
81.73%
Explanation:
sales of goods.
Vertical Analysis (Liabilities, Balance Sheet):
Al-Karam Textile ‘11
Vertical Analysis Balance Sheet Al-Karam '11

0.00%
0.09% 0.00%
Shareholder Equity
21.19%
Revenue Reserve
Unappropriate Profit
Staff Retirement Benefit
41.16%
Deffered Taxation
Long Term Finance
11.06%
Trade & Other P/A
Short Term Borrowings
Accrued Markup
Tax Net
11.88%
Current portion of long term finance
10.29%
0.97%
0.00%
3.37%
Explanation:
Vertical analysis of balance sheet liabilities side is actually to allocate that which part of liability side has
what portionate of total liability side.
In the vertical analysis of the balance sheet’s liability side we have examined that shareholders equity is
21.19% of the total liabilities. Next item of the liability side is revenue reserves which is also known as the
retained earnings is 11.06% of the total liabilities. As like unappropriated profit which is the part of the
Net income but reserve for any purpose which is not specified have contributed 11.88%. Company also
maintain the staff retirement benefit which will be provided to the customers after their complete of
duration of the job tenure is 0.97%. Company have to paid some portion of tax which is liability on the
company and they will pay it in the next year have a contribution of 3.37% of the total liabilities. Company
in FY 2011 have not borrow any long term liability. So there is no contribution of long term financing to
generate the total liability side. Trade and other payable are the liabilities which company have to pay to
their creditors and other lenders against their services or products have a portion of 10.29% of the total
liabilities. Short term liabilities are the major portion of the company by which they run their operations
and meet their short term obligations. Short term liabilities have a portion of 41.16% of the total liabilities.
But Markup, Tax Net, and current portion of long term liabilities which is matured is not available for the
current year.

0.00%
3.12%
0.24%
18.62% Shareholder Equity

Revenue Reserve
24.43% Unappropriate Profit
Deffered Taxation
9.72%
Long Term Finance
Trade & Other P/A
7.33%
Accrued Markup
18.40% Tax Net
3.69%
0.96% Current portion of long term finance
13.50%
Explanation:
what portionate of total liability side.
retained earnings is 9.72% of the total liabilities. As like unappropriated profit which is the part of the Net
income but reserve for any purpose which is not specified have contributed 7.33%. Company also
in FY 2012 have borrow any long term liability. Long term financing have a portion of 13.50% of the total
liabilities. Trade and other payable are the liabilities which company have to pay to their creditors and
other lenders against their services or products have a portion of 18.40% of the total liabilities. Short term
liabilities are the major portion of the company by which they run their operations and meet their short
term obligations. Short term liabilities have a portion of 24.43% of the total liabilities. Accrued Markup
have a 0.24% portionate to total liabilities. But Tax Net is not available in this year too. Current portion of
long term liabilities which is matured is 3.12% for the current year of the total liabilities.
0.56% 0.00%
4.03%

Revenue Reserve
18.23%
Deffered Taxation
9.43%
Long Term Finance
Trade & Other P/A
8.53%
Accrued Markup
28.26% Tax Net
9.07% 2.86%
Explanation:
what contribute of total liability side.
have borrowed long term debts. Long term financing have a portion of 9.07% of the total liabilities. Trade
and other payable are the liabilities which company have to pay to their creditors and other lenders
against their services or products have a portion of 28.26% of the total liabilities. Short term liabilities are
the major portion of the company by which they run their operations and meet their short term
obligations. Short term liabilities have a portion of 18.23% of the total liabilities. Accrued Markup have a
0.56% contribute to total liabilities. But Tax Net is not available in this year too. Current portion of long
term liabilities which is matured is 4.03% for the current year of the total liabilities.
0.53% 0.00%
4.13%

Revenue Reserve
28.80% Staff Retirement Benefit
8.63%
Deffered Taxation
Long Term Finance
Trade & Other P/A
9.26%
Accrued Markup
Tax Net
1.06%
Current portion of long term finance
8.21% 1.85%
20.97%
Explanation:

0.00%
0.69%
5.46%

Revenue Reserve
Deffered Taxation
10.10% Long Term Finance
Trade & Other P/A
Accrued Markup
10.22%
Tax Net
9.22% 0.47%
1.69%
Explanation:
Gul Ahmad Textile ‘11
Gul Ahmad Vertical Analysis Balance Sheet '11

0.00%
3.10% 3.11%
1.06%
Shareholder Equity
14.12%
Revenue Reserve
5.87% 0.07%
Deffered Taxation
1.39%
Long Term Finance
Trade & Other P/A
47.83%
10.77%
Accrued Markup
Tax Net
Current portion of LTL
12.68%
Explanation:

0.05%
1.05%
3.75% 7.17%
Shareholder Equity
Revenue Reserve
19.36%
Deffered Taxation
41.14% -1.28% Long Term Finance
0.13% Trade & Other P/A
1.55% Short Term Borrowings
Accrued Markup
11.83%
Tax Net
15.25%
Explanation:
Net income but reserve for any purpose which is not specified have contributed -1.28%. Company also
1.05% contribute to total liabilities. But Tax Net is 0.05% in this year. Current portion of long term liabilities
which is matured is 3.75% for the current year of the total liabilities.

2.65%
0.91% 0.00%
7.19%
Shareholder Equity
Revenue Reserve
15.01%
Deffered Taxation
39.13%
3.42%
Long Term Finance
0.16%
Trade & Other P/A
1.49%
10.17%
Accrued Markup
Tax Net
19.88%
Explanation:
0.73% 0.00% 2.86%
7.53%
Shareholder Equity
Revenue Reserve
14.75%

Deffered Taxation
5.16% Long Term Finance
1.37% Short Term Borrowings
9.22% Accrued Markup

Tax Net
25.97%
Explanation:

2.86%
0.83% 0.00%
9.16%
Shareholder Equity
Revenue Reserve
16.96%
35.43% Deffered Taxation
Long Term Finance
0.18%
1.40%
Accrued Markup
9.65%
Tax Net
20.90%
Explanation:
Vertical Analysis (Assets, Balance Sheet):
Vertical Analysis Al-Karam '11
0.06% Property, Plant & Equipenment

14.71%
2.87% LTL to Employees
LT Deposits
0.00% 0.00%
0.00% Stores & Spares
0.14% Stock in Trade

43.67%
Trade Debts
12.78% Loans & Advances
Short Term Payments
Advance against investment
Investment
Other Recieveables
19.90% Tax Net
Cash and Bank Balances
5.84% 0.01%
0.03%
Explanation:
Vertical analysis of the assets side of the balance sheet is presenting that how much every element
contribute in the total assets.
In the above graph, graph shows that property, plant & equipment have a major portion in the total assets
which is near to 43.67% of total assets. Company lend money to the employees for long term span of time
which have a contribution around 0.01% of the total assets. Company have maintain some investment in
the banks for long term span of time which is around 0.03% of the total assets. Company have some
inventory in its store which is 5.84% of the total assets. Company have some stock in trade which is 19.90%
of the total assets. Company maintain its receivable in the assets side around 12.78% of the total assets.
Company lend money to the suppliers and its internal and external customers which is 0.14% of the total
assets. Company have other receivables around 0.14% of the total assets. At the end and last item of the
balance sheet of the company is cash and bank balances which have a contribution around 14.71% of the
total assets.

1.61%
1.30%
0.00%
0.05% 0.00%
0.17%
LTL to Employees
LT Deposits
Stores & Spares
19.21% Stock in Trade
39.42%
Trade Debts
Loans & Advances
Short Term Payments
Investment
Other Recieveables
27.78% Tax Net
5.04%
0.02% Cash and Bank Balances
0.03%
Explanation:
assets. Company have to receive some short term payment which is 0.17% of the total assets. Company
have other receivables around 1.61% of the total assets. At the end and last item of the balance sheet of
the company is cash and bank balances which have a contribution around 5.36% of the total assets.

1.57%
0.47%
2.82%
0.00% 0.00%
0.05%
LTL to Employees
LT Deposits
22.86% 33.38% Stores & Spares

Stock in Trade
Trade Debts
Loans & Advances
Short Term Payments
Investment
0.01%
6.64% Other Recieveables
0.03%
Tax Net
32.04%
Cash and Bank Balances
Explanation:
assets. Company have to receive some short term payment which is 0.05% of the total assets. Company
have other receivables around 0.47% of the total assets. At the end and last item of the balance sheet of
the company is cash and bank balances which have a contribution around 2.82% of the total assets.
2.64% Vertical Analysis Al-Karam '14

0.44%
0.00% 0.00% 0.32%
0.35%
Property, Plant & Equipenment
5.95%
LTL to Employees
LT Deposits
33.77% Stores & Spares

Stock in Trade
22.76%
Trade Debts
Loans & Advances
Short Term Payments
Investment
5.72% 0.03% Other Recieveables

Tax Net
0.03%
Explanation:
assets. Company have to receive some short term payment which is 0.00% of the total assets. Advance
again investment have a contribution around 5.95% of the total assets. Company have other receivables
around 0.44% of the total assets. Company have to get back some taxation from the government which
is around 2.64% of the total Assets. At the end and last item of the balance sheet of the company is cash
and bank balances which have a contribution around 0.32% of the total assets.

0.18% 0.02%
0.11%
0.00% 0.00%
0.33% 5.93% Property, Plant & Equipenment
LTL to Employees
LT Deposits
Stores & Spares
21.88%
Stock in Trade
43.51%
Trade Debts
Loans & Advances
Short Term Payments
Investment
Other Recieveables
21.47%
Tax Net

6.52%
0.03%
Explanation:
assets. Company have to receive some short term payment which is 0.00% of the total assets. Advance
again investment have a contribution around 0.18% of the total assets. Company have other receivables
around 0.02% of the total assets. Company have to get back some taxation from the government which
is around 5.93% of the total Assets. At the end and last item of the balance sheet of the company is cash
and bank balances which have a contribution around 0.11% of the total assets.
Horizontal Analysis:
Al-Karam ‘11
Al-Karam HA P&L '11

0.27 0.14
2.98
4.52
1.14
1.14
5.23
4.38
4.75 0.34
Net Sales CGS GP S&A Cost Other Income

Operating Pro Finance Cost Pro Before Tax Tax Pro After Tax
Al-Karam ‘12
Al-Karam HA P&L '12

0.34 0.33 0.51
-0.12
-0.47
-0.64 0.50
1.01
0.58
12.07

Al-Karam ‘13
Al-Karam HA P&L '14

-0.08 -0.17 -0.04 0.46 0.41
0.83
1.37
-0.80
1.56
19.76

Al-Karam ‘15
Al-Karam HA P&L '15

-0.53 -0.63
0.00 -0.04
2.38
1.50
0.96
1.32
2.29
16.73

Gul Ahmad ‘11
Gul Ahmad HA P&L '11
0.29
0.26
1.51 0.46
0.30
-0.01
0.59
0.48
0.16
1.17
Net Sales Cost of Goods Sold Gross Profit S&A Cost Other Income
Gul Ahmad ‘12
0.27
0.30 0.12
-1.50
0.42
-0.16
-0.17
0.04 0.46
-1.00
Gul Ahmad ‘13
0.47 0.53
-0.40
0.54
0.19
0.30
0.48
0.25
0.54 0.73
Gul Ahmad ‘14
0.13 0.68
1.59 0.64
0.88
1.11
0.23
1.30
0.61
8.38
Gul Ahmad ‘15

0.11 -0.23
0.27
0.41
0.28
0.69
0.65
0.92
1.80
12.66

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Analysis of Financial Statements

Syed Hassaan Ali

behavior of companies of the textile industrial sector of Pakistan.

contribution in stimulating suggestions and encouragement, helped us to coordinate our

assignment especially in writing this report.

and their guidance.

1. Al-Karam Textile Mills (Pakistan Synthetic Limited)

History of Al-Karam Textile Mills:

The Retail Arm of the Group

History of Gul Ahmad Textile Mills:

Net Working Capital

NET WORKING CAPITAL

Acid Test Ratio

0.59 0.60 0.59 0.58

0.10 0.09 0.10

16000000 15691806 15760428

2000000 1936192 1983843 2181270

3.00 2.98 2.92

Net Profit Margin

0.01 0.01 0.01

Retun on Total Equity

Assets Turnover Ratio

Operating Income Margin

Gross Profit Margin

Degree of Financial Leverage

0.00 -0.13 -0.03

Earning Per Share

0.00 0.00 0.00 0.00 0.00

Book Value Per Share

20.00 20.82 19.15 19.94 20.82 20.50

Vertical Analysis (Profit & Loss Statement):

AlKaram Vertical Analysis '2011

AlKaram Vertical Analysis '12

AlKaram Vertical Analysis '13

Alkaram Vertical Analysis '14

AlKaram Vertical Analysis '15

GulAhmad Vertical Analysis '11

GulAhmad Vertical Analysis '12

GulAhmad Vertical Analysis '13

GulAhmad Vertical Analysis '14

GulAhmad Vertical Analysis '15

Al-Karam Textile ‘11

Vertical Analysis Balance Sheet Al-Karam '11

Vertical Analysis Balance Sheet Al-Karam '12

18.62% Shareholder Equity

Vertical Analysis Balance Sheet Al-Karam '13

18.07% Shareholder Equity

Vertical Analysis Balance Sheet Al-Karam '14

16.54% Shareholder Equity

Vertical Analysis Balance Sheet Al-Karam '15

19.35% Shareholder Equity

Gul Ahmad Vertical Analysis Balance Sheet '11

Gul Ahmad Vertical Analysis Balance Sheet '12

Gul Ahmad Vertical Analysis Balance Sheet '13

Gul Ahmad Vertical Analysis Balance Sheet '14

0.73% 0.00% 2.86%

32.25% Staff Retirement Benefit

9.22% Accrued Markup

Gul Ahmad Vertical Analysis Balance Sheet '15

Vertical Analysis Al-Karam '11

0.06% Property, Plant & Equipenment

0.14% Stock in Trade

Vertical Analysis Al-Karam '12