UNIVERSITY OF CENTRAL PUNJAB, FAISALABAD
Analysis of Financial
Statements
Topic: financial ratio analysis
Submitted by:
Saira Khalid
Reg. No. 0201
Sana Riaz
Reg. No. 0185
Section: M.Com. 1A
Submitted to:
Sir MuzammilMurtaza
Date of submission:
20th-June-2014
Dedication
We like to dedicate our work to our teacher Sir Muzammal Murtaza and the
people, who helped us in our project.
ACKNOWLEDGEMENT:
First of all, we are grateful Allah Al-mighty who gave us ability to
accomplish this project. The completion of this project is a matter of
pleasure for us but it was not possible without the support of our teacher,
infact a mentor, Mr. Muzammal Murtaza , for he has provided us the useful
knowledge of subject of Analysis of Financial Statements. So, we are
thankful to our Sir Muzammal Mmurtaza . We are thankful to our parents
also who helped and supported us.
Executive Summary:
In this projectwe make ration analysis of Azgard Nine Limited which is a
subsidiary of Jahangir Saddiqui Company.We make Profitability Analysis
,Liquidity Analysis and Long Trem debt Paying ability alaysis.We choose 2 years
for analysis purpose (2013 and 2014).One by one we calculate all the ratios but it
is observed that the position of this company is very poor.It liquidity position is not
good.It have no debt paying abilityand profitibility position is also not
good.Management should take some strategis decisions to overcome the problems
facing by the company.
INTRODUCTION:
We have selected a subsidiary of Jahangir Siddiqui and company named “Azgard Nine limited”
for ratio analysis. The statements considered for ratio analysis belong to year 2013.
What is Azgard Nine Limited:
Basic introduction of company:
Azgard Nine Limited ("the Company") was incorporated in Pakistan as a Public
Limited Company and is listed on Karachi Stock Exchange (Guarantee) Limited.
The Company is a composite spinning, weaving, dyeing and stitching unit
engaged in the manufacture and sale of yarn, denim and denim products.
Mission:
“To retain a leadership position as the largest value added denim products’
company in Pakistan.”
Vision:
“To become a major global Fashion Apparel Company.”
Permissible company information:
The Company is a composite spinning, weaving, dyeing and stitching unit
engaged in the manufacturing of yarn, denim and denim products.
Business Type
Exporters
Contact Person
Mr. NaeemYousaf Qureshi( Company Secretary)
Company Profile:
AZGARD NINE LTD. is one of the Textile Products in Lahore, Punjab, located in Ismail
Aiwan-e-Science,Shahrah-e-JalauddinRoomi,Ferozepur Road.
Contact information:
Phone:(92 42) 35761794, 35751515
Fax: +92 42-3576179 --- +92 42-35761794, 35751515,
RATIO ANALYSIS:
Liquidity Ratios:
Current ratio
Current ratio = current assets ÷ current liabilities
2013
= 5970155525 / 9732794035
= 0.613
2012
= 17,682,682,199 / 22,056,458,874
= 0.80
Interpretation:
This ratio shows that we are unable to pay short term obligations. It also shows that utilizing all
of the current assets will pay nearly half of the obligations. So, this ratio is unfavorable for 2013
but when compared with 2012, it is good in 2012 as compared with 2013 but not favorable for
payment of all short term liabilities.
Inventory turnover ratio
Inventory turnover ratio = cost of goods sold ÷ average inventory
2013
= 13258045955 / (2211143101+3027802430) /2
= 5.06 times
2012
= 12,642,326,813 / (3027802430+ 3,763,161,375)/2
= 3.72 times
Interpretation:
This ratio shows the number of times the inventory cycle of converting into finished goods is
completed until sold. It shows that mostly, 5 times approximately the inventory is processed in a
year to convert in to cost of goods sold. But in 2012, this ratio is unfavorable because we process
inventory only 3.72 times in a year.
Inventory turnover in days
Inventory turnover in days = 365 ÷ inventory turnover
2013
= 365 / 5.06
= 72.1152 days
2012
= 365 / 3.72
= 98 days
Interpretation:
This ratio indicates the number of days the inventory takes to be processed. We can say that
previous ratio tells the number of times and this ratio tells the number of days of same inventory
for processing and conversion into finished goods. It is approximately 72 days to process
inventory. While in 2012, it is quite high which is unfavorable.
Accounts receivable ratio
Accounts receivable turnover = net credit sales ÷ average gross receivables
2013
= 13719625585 / (2149837255+2384301663) /2
= 6.052 times
2012
= 11,524,279,419/(2,384,301,663 + 3,185,586,167) / 2
= 4.138 times
Interpretation:
This ratio tells that how many times we collect payment from debtors in a year. As per
calculation, Azgard Nine takes the payment from debtors 6 times in a year. In 2012, it shows that
company makes collection from debtors 4 times. Which shows that company has improved its
policy for debt collection.
Accounts receivable turnover in days
Average collection period = 365 ÷ accounts receivable turnover
2013
= 365 / 6.0517
= 60.3 days
2012
= 365 / 4.138
= 88.2 days
Interpretation:
It is the days taken for making collection of the receivables. Approximately, it takes 2 months to
get the single payment. Note that these are the related to previous year only, previous years amy
show different collection in days. In 2012, the number of days is in excess than in 2013 showing
unfavorable outcomes.
Accounts Payable turnover:
Accounts payable turnover = Cost of goods sold ÷ average accounts payable
2013
= 13258045955 / (2526245640+4049064395) /2
= 4.03 times
2012
= 12,642,326,813 / (4,049,064,395+2,743,608,344) /2
= 3.72 times
Interpretation:
Accounts payable turnover tells the number of times we make payment to our creditors. We
make the payment a time in a year. We make the payment earlier showing lower cash availability
in 2012. The year 2013 is favorable.
Accounts payable turnover in days:
= 365 ÷ Accounts payable turnover
2013 = 365 / 4.03
= 90.51 days
2012 = 365 / 3.72
= 98.0565
Interpretation:
If we calculate the number of days we make the payment, it is about after a quarter. It is relevant
to previous year only.
Average days in accounts payable:
= ending accounts payable ÷ (COGS ÷365)
2013 = 2526245640 / (13258045955 / 365)
= 69.5487 days
2012 = 4,049,064,395 / (12,642,326,813 / 365)
= 116.9 days
Interpretation:
On average, it takes about 70 days to make the payment. It shows that in last year, we made the
payments earlier than previous years. Average days for 2012 are 116.9. which seems somehow
good for the company.
Operating cycle:
Operating cycle = Inventory turnover in days + accounts receivable turnover in days
2013
= 72.1152 + 60.3
= 132.4152
2012
= 98 + 88.2
= 186.2
Interpretation:
It shows that we process inventory and receive payments from debtors in total after 132 days. It
means that from raw material to recipt of sales, it requires 132 days approximately.
Cash Cycle:
Cash cycle = Operating cycle – Accounts payable turnover in days
2013
= 132.4152 – 90.51
= 41.9052 days
2012
= 186.2 – 116
= 70.2 days
Interpretation:
It tells that what is the days gap in receipt of cash from debtors and payment to the creditors. It is
unfavorable because we make the payment after 90 days and collects after 132 days and fall
short of cash. Then we need short term loan to finance the daily activities of the company. In
2012, it is also unfavorable and company needs to revise its credit policy.
No .of days 2013
Payment to creditors
No .of days
Receipt from debtors
0
50
100
150
No. of days 2012
Payment to creditors
No. of days
Receipt from debtors
0
50
100
150
200
Quick Ratio
𝐶𝑢𝑟𝑟𝑒𝑛𝑡𝐴𝑠𝑠𝑒𝑡𝑠 − (𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠 + 𝑃𝑟𝑒𝑝𝑎𝑖𝑑𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠)
𝐶𝑢𝑟𝑟𝑒𝑛𝑡𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
2013
5,970,155,525– (2,211,143,101 + 629,344,302)
=
9,732,794,035
= 3.21
2012
15,194,672,724 − (3,027,802,430 + 831,308,310
=
2,753,455,935
= 4.11
Interpretation:
As compared to 2013 the firm have high quick ratio but excluding non liquid assets firm have
more current assets in the form of receivables which is not a good sign.
Cash Ratio
𝐶𝑎𝑠ℎ𝐸𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠 + 𝑀𝑎𝑟𝑘𝑒𝑡𝑎𝑏𝑙𝑒𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑖𝑒𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
2013
=
132,259,604 + 700,000,000
9,732,794,035
=
2012
0.085
289,721,743 + 10,969,811,440
=
2,753,455,935
=
4.08
Interpretation:
The firm have not enough cash to pay its liability as its ratio is very low.But in 2013 its position
is good enough because of high ratio.
Working Capital
2013 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡𝐴𝑠𝑠𝑒𝑡𝑠 − 𝐶𝑢𝑟𝑟𝑒𝑛𝑡𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
2012
=
5,970,155,525 − 9,732,794,035
=
- 37626385510
= 𝐶𝑢𝑟𝑟𝑒𝑛𝑡𝐴𝑠𝑠𝑒𝑡𝑠 − 𝐶𝑢𝑟𝑟𝑒𝑛𝑡𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
=
17,682,682,199 - 22,056,458,874
= -4373776675
Interpretation:
In 2012, It shows a weak position of the firm because current liabilities are less than its current
liabilities.Same is the position in 2013 as well.Firm have poor position.
Sales to Working Capital Ratio
2013:
𝑆𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝑊𝑜𝑟𝑘𝑖𝑛𝑔𝐶𝑎𝑝𝑖𝑡𝑎𝑙
=
13,719,625,585
− 21000081095
=
- 0.65
2012:
𝑆𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝑊𝑜𝑟𝑘𝑖𝑛𝑔𝐶𝑎𝑝𝑖𝑡𝑎𝑙
13,719,625,585
=
222004060
=
61.76
Average Working Capital:
2011
= 19,589,673,534 - 14,771,888,734
= 4817784800
2012
= 17,682,682,199 - 22,056,458,874
= - 4373776680
2013
= 5,970,155,525 − 9,732,794,035
=
- 37626385510
Average WC (2013) = ( -4373776680) + ( - 37626385510) / 2
= -21000081095
Average WC (2012) = ( -4373776680) + (4817784800 ) / 2
= 222004060
Interpretation:
This ratio is also negative as working capital is negative.There is negative contribution of assets
in generation of sales for the firm.It was in better position in 2012 but become poor in 2013.
Long term debt paying ability
Time Interest Earned Ratio
𝑁𝑒𝑡𝐼𝑛𝑐𝑜𝑚𝑒 + 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡𝐸𝑥𝑝𝑒𝑛𝑠𝑒 + 𝑇𝑎𝑥𝐸𝑥𝑝𝑒𝑛𝑠𝑒
− 𝐸𝑞𝑢𝑖𝑡𝑦𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠
+ 𝑁𝑜𝑛𝐶𝑜𝑛𝑡𝑟𝑜𝑙𝑙𝑖𝑛𝑔𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
÷
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡𝐸𝑥𝑝𝑒𝑛𝑠𝑒 + 𝐼𝑛𝑐𝑙𝑢𝑑𝑖𝑛𝑔𝐶𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑒𝑑𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
2013=
963,944,545 + 2,101,750,204 + 2,101,750,204 +
0 − 1,262,285,899
2,101,750,204 + 262,988,125
=
3905159054/ 2364738329
=
2012=
1.65
−6,076,575,125 + 115,954,408 + 3,424,378,071 +
3,424,378,071 + 1,425,935,847
=
-7007406877 / 4850313918
=
- 1.44
Cash Base Time Interest Earned Ratio
𝐸𝐵𝐼𝑇 + 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛
=
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
2013
=
4,257,401,465 + 498,380,814
2,101,750,204
0 − 4,471,164,231
=
2012
2.26
−2,536,242,646 + 517,909,929
=
3,424,378,071
=
-0.58
Fixed ChargeCoverege Ratio
𝑁𝑒𝑡𝐼𝑛𝑐𝑜𝑚𝑒 + 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡𝐸𝑥𝑝𝑒𝑛𝑠𝑒 + 𝑇𝑎𝑥𝐸𝑥𝑝𝑒𝑛𝑠𝑒 + 𝑁𝑜𝑛𝐶𝑜𝑛𝑡𝑟𝑜𝑙𝑙𝑖𝑛𝑔𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
− 𝐸𝑞𝑢𝑖𝑡𝑦𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 + 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡𝑃𝑜𝑟𝑡𝑖𝑜𝑛𝑜𝑓𝑅𝑒𝑛𝑡𝑎𝑙𝑠
÷
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡𝐸𝑥𝑝𝑒𝑛𝑠𝑒 + 𝐼𝑛𝑐𝑙𝑢𝑑𝑖𝑛𝑔𝐶𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑒𝑑𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 + 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡𝑃𝑜𝑟𝑡𝑖𝑜𝑛𝑜𝑓𝑅𝑒𝑛𝑡𝑎𝑙𝑠
2013 = 963,944,545 + 2,101,750,204 +
0 − 1,262,285,899 + 0
2,101,750,204 + 262,988,125 + 0
=
1803408850 / 2364738329
=
0.76
−6,076,575,125 + 3,424,378,071 +
2012=
0 − 4,471,164,231 + 0
3,424,378,071 + 1,425,935,847 + 0
=
=
-7123361285 / 4850313918
- 1.46
Debt Ratio
=
𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑇𝑜𝑡𝑎𝑙𝐴𝑠𝑠𝑒𝑡𝑠
2013
=
15942846283
20,675,719,463
=
2013
0.77
24809914809
=
32,877,354,923
=
0.75
Interpretation:
In 2013, the Firm is financed with 77% assets and 23% liabilities which means that
company is less dependent on outside investors.In 2012, it is financed 75% of debt and
25% of equity means more dependence on debt in 2012.
Proportion of assets financed by debt.
Debt/Equity Ratio
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
=
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠𝐸𝑞𝑢𝑖𝑡𝑦
2012
24809914809
=
12264884032
=
2013
0.55
9,732,794,035
=
7966372553
=
0.81
Interpretation:
It shows the capital structure of the firm.The Firm is 12.63 capitalizes with equity but in 2012it is
capitalized 5.54 with equity.In 2013 it has more dependence on equity than in 2012.
Debt to Tangible Net Worth Ratio
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
=
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠𝐸𝑞𝑢𝑖𝑡𝑦 − 𝐼𝑛𝑡𝑎𝑛𝑔𝑖𝑏𝑙𝑒𝐴𝑠𝑠𝑒𝑡𝑠
15942846283
2013 =
7966372553 − 1,302,407
= 2.002
24809914809
2012 =
4,471,164,231 − 3,907,224
= 5.55
Interpretation:
In 2013, the firm is financed by 1.26 of the current liabilities than by net worth and in 2012,
5.55 is financed of current liabilities than by net worth which is conservative approach and tell
the true picture by excluding intangibles.In 2012, more dependent on equity.
Current Debt/Net Worth Ratio
2013
𝐶𝑢𝑟𝑟𝑒𝑛𝑡𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
=
𝑁𝑒𝑡𝑊𝑜𝑟𝑡ℎ
9,732,794,035
=
4732873180
=
2012
2.05
𝐶𝑢𝑟𝑟𝑒𝑛𝑡𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
=
𝑁𝑒𝑡𝑊𝑜𝑟𝑡ℎ
22,056,458,874
=
4732873180
=
2.05
Net Worth ( 2013) = Total Assets - Total Liabilities
= 20,675,719,463
- 15942846283
= 4732873180
Net Worth ( 2012) = Total Assets - Total Liabilities
=
17,682,682,199 - 24809914809
= 4732873180
Interpretation:
This ratio shows that firm is financed more by liabilities than its owner’s equity in both years.
Total Capitalization Ratio
2013
=
𝐿𝑜𝑛𝑔 𝑇𝑒𝑟𝑚 𝐷𝑒𝑏𝑡
𝑇𝑜𝑡𝑎𝑙 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
=
1,646,718,198
6195436898
=
2012
=
2.67
𝐿𝑜𝑛𝑔 𝑇𝑒𝑟𝑚 𝐷𝑒𝑏𝑡
𝑇𝑜𝑡𝑎𝑙 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
=
24,020,739
4,471,164,231
=
0.0053
Interpretation:
It shows more investment of equity rather than creditors which may be less risky for the firm.
Fixed Asset/Equity Ratio
2013
𝐹𝑖𝑥𝑒𝑑𝐴𝑠𝑠𝑒𝑡𝑠
=
𝐸𝑞𝑢𝑖𝑡𝑦
12,953,017,078
=
1,262,285,899
=
2012
10.26
𝐹𝑖𝑥𝑒𝑑𝐴𝑠𝑠𝑒𝑡𝑠
=
𝐸𝑞𝑢𝑖𝑡𝑦
13,395,217,269
=
4,471,164,231
=
2.99
Interpretation:
In 2013, 10.26 funds are provided by shareholders to finance fixed assets.which is more than
that of 2012.
Profitability of the firm:
On the basis of net income
Net Profit Margin:
= Net profit ÷ Net sales
2013 = 963944545 / 13719625585
= 0.07026 or 7.02%
2012 = -6,076,575,125 / 11,524,279,419
=-52.73%
Interpretation:
This ratio shows the percentage profit that we have earned from selling one unit of goods or
services. It shows that we earn only 7% profit on sales which is quite lower as compared to any
other business. There is 52.73% of loss in 2012. The dramatic and drastic change in profit
percentage, indicates something was wrong in 2012 in the company. But now company is trying
to revive.
Total assets Turnover
= net sales ÷ average total assets
2013 = 13719625585 / {(206755719463-700000000-16600910)+(3287735492310969811440) /2}
= 13719625585 / (206039118500 + 21907543480) /2
= 13719625585 / 113973331000
= 0.12 times
2012
= 11,524,279,419 / (17,682,682,199 + 19,589,673,534) /2
= 0.65 times.
Interpretation:
This ratio shows the sales that can be generated from the use of total assets in the
business. Azgard Nine’s ratio is quite lower it means it is not making the efficient use of the
assets to generate sales. The turnover in 2012 was 0.65 times more than 2013.
Return on assets
= net income ÷ average total assets
2013 = 963944545 / 113973331000
= 0.00845 or 0.845%
2012 = (6,076,575,125) / (32,877,354,923 + 36,146,856,458) /2
= -0.17 or -17%
Interpretation:
It tells that how much return the company generates form the use of its assets. The higher the
return the better it will be. But for Azgard Nine, it is quite lower that is 0.0084.while in 2012,
there was a loss showing negative trends. But in 2013, company is trying to take its position.
Return on assets by Dupont analysis:
= (net income ÷ net sales) x (net sales ÷ average total assets)
2013 = (963944545 / 13719625585) x (= 13719625585 / 113973331000
= 0.07026 or 7.02% x 0.12 times
= 0.0084 or 0.84%
2012 = -6,076,575,125 / 11,524,279,419
36,146,856,458) /2
x (6,076,575,125) / (32,877,354,923 +
= -0.17 x -0.52
= -0.089
Interpretation:
Dupont ratio is the combination of net profit margin and total asset turnover. It tells shorting the
return the company is generating. It is quite lower. In 2012, there was a loss of 8.9% which
indicates poor condition.
On the basis of operating income
Operating income margin
= operating income ÷ net sales
2013 = 1054167199 / 13719625585
= 0.077
2012 = (2,536,242,646) / 11,524,279,419
= -0.22
Interpretation:
The ratio tells the operating profit to sales available.Azgard Nine is not in a good position, infact
it is generating an operating loss in 2012 which is not good for any company. It also shows that
the company is not able to pay its debt charges and is not in a position to pay dividends. But
company is reviving in 2013 for earning is 7% now.
Operating assets turnover
= net sales ÷ average operating assets
2013 = 13719625585 / 20517676860
= 0.67times
2012 = 11,524,279,419 / 14370389290
= 0.80 times
Interpretation:
This ratio tells that how much about of net sales is generated through operating assets. The
operating assets include only the assets that are used to perform the operations. It generates sales
only 0.7 times in a year using the operating assets. This was the condition in 2013. But in 2012,
its operating assets are helping to generate profits 0.8 times better than 2013.
Return on operating assets
= operating income ÷ average operating assets
= -1054167199 / 20517676860
= 0.513
2012 = (2,536,242,646) / 14370389290
= 0.17
Interpretation:
The ratio is very important to measure the operating income generated using operating assets.
But this ratio tells that operating assets are used in-efficiently so that they are generating losses
and negative percentages. In 2013, it generates 0.51 loss and 0.17 loss in 2012. Situation is worse
in 2013.
Operating assets
= total assets – (intangibles + investment + construction in progress)
2013 = 20675719463 – (700000000 + 16600910)
= 19959118550
2012 = 32,877,354,923 – (10,969,811,440 + 831,308,310)
= 21076235170
2011 = 19,589,673,534 – (955,318,688 + 10,969,811,440)
= 7664543402
Operating assets includes those assets only that generate operating profits and facilitates
operations.
Return on assets by Dupont Analysis:
= (operating income ÷ net sales) x (net sales ÷ average operating assets)
2013 = -0.077 x 0.6874
= -0.05
2012 = -0.22 x 0.8
= -0.176
Interpretation:
Dupont is the combination of the operating profit and operating assets turnover. This ratio is very
useful to easy and quick calculations of return on operating assets. It shows that operating assets
are generating negative returns or losses in 2012 and 2013 both. Which shows poor position of
the company.
Sales to fixed assets ratio
= net sales ÷ average net fixed assets (excluding construction in progress)
2013 = 13719625585 / 20675719463
= 0.6635 or 66.35%
2012 = 11,524,279,419 / 15,194,672,724
= 0.76
Interpretation:
This ratio tells that efficiency with which the fixed assets are used to generate sales for the
products of the company. It is obvious that the sales are generated when the products are
prepared. And the products are prepared using the fixed assets. Assets co-operate about 66% to
generate sales in 2013 and 76% contribution in 2012.
Return on investment
= {net income + interest * (1 – tax rate)} ÷ Average (long term liabilities + equity)
2013 = 963944545 +137539517 * (1- 0.125) / (6210052248+1262285899) +
(4471164231+2753455935) /2
= 1084979320 / 7472338147 + 7224620166 /2
= 1084979320 / 7348479157
= 0.1476
2012 = (6,076,575,125) + 3,424,378,071* (tax relief 1.9%) / (15,194,672,724+
4,548,718,700)+ (4,548,718,700+ 16,557,182,924) /2
=-6141638308 / 30296342230
= -0.203
Interpretation:
This ratio measures the return that we are able to pay to the investors of debt and equity security.
It uses the income available to be distributed to the creditors and shareholders. We have about
0.1476 (in percents) the income to make payment in 2013. In 2012, return on operating assets is
-0.203lesser than 2013 and poor.
Return on equity
= (net income – dividends on redeemable preferred stock) ÷ Average total equity
2013 = (963944545 – 0) /4,471,164,231
= 0.22
2012 = ((6,076,575,125) – 0) / 10,269,064,145
= -0.59
Interpretation:
The return available to the equity shareholders. It must be remembered that dividends paid to
redeemable preferred stock must be subtracted before calculation so as to show the actual income
available to equity holders (both ordinary and preferred). We are able to pay 22% of the equity
holders. While in 2012, the -60% return is generated for equity shareholders.
Return on common equity
= (net income – preferred dividend) ÷ Average common equity
2013 = (963944545 – 9413535) / 10115628290
= 0.094 or 9.4%
2012 = ((5,960,620,717)–0) / 7370114186
= -0.81
Interpretation:
The income available to be distributed to the equity investors is calculated here. It tells that about
9.4% of equity holders can be paid dividend in 2013. Negative return is generated in 2012.
Average common equity:
Share capital + retained earnings – treasury stock
2013 = 4548718700 + 3417653853 = 7966372553
2012 = 4548718700 + 7716165332 = 12264884030
Average = 10115628290
2011 = 4,548,718,700 + 7,566,084,048 = 12114802750
Average = 12189843390
Return on total assets variation
= (net income + interest expense) ÷ average total assets
2013 = 963944545+2101750204) / 26776537190
= 3065694749 / 26776537190
= 0.1145 or 11.45%
2012 = (6,076,575,125) + 3,424,378,071 / 34512105690
= -0.78
Interpretation:
The ratio of Azgard Nine is 11.45% for both creditors and shareholders in 2013. While in 2012,
the negative 78% in 2012.
Gross profit margin
= gross profit ÷ net sales
2013 = 461579630 / 13719625585
= 0.03364 or 3.36%
2012 = (1,118,047,394) / 11,524,279,419
= -0.097 or -9.7%
Interpretation:
This ratio tells that Azgard Nine earns about 3.36% of the net sales in gross in 2013. It is quite
lower for proper survival of the company in the industry. In 2012, the negative profit or loss is
generated showing poor condition.
OVERALL SUMMARY:
Considering the year 2012, the position of the company was very miserable because company
was not generating enough revenue and was earning a huge loss. This might be due to following
reasons:




In-efficient management
Unrelated policy decisions
Unfavorable conditions in market
Large number of scandals
While, year 2013 is better than 2012, because the company is making profits.Although these
profits are not huge but company is trying to revive. If the company wants to stay in the market
then it must improve its profit ratios.
Azgard Nine Limited (ANL) is not in a good position for the survival. Management must take
decision for its betterment which may be its joint venture or divestiture with other companies or
its liquidation if management can’t be made better.
References:
http://azgard-nine-ltd.pakbd.com/about_us#sthash.IzOHRwqD.dpuf
http://www.azgard9.com/financial_information.php
http://www.lahoreindustry.com/azgard-nine-ltd-co10378
http://www.pakistanbusinessjournal.com/b2b-directory/azgard-nine-ltd_84570.html