IOBM

Report on Analysis of
Mehran Sugar Mills
Financial Management
Sec: B

Submitted to:

Sir Sharique Ayubi

Submitted by:

Letter of transmittal

April 19, 2011
Sir Sharique Ayubi,
Financial Management,
Institute of Business Management,
Korangi Creek, Karachi
Dear Sir,
This letter is pertaining to the report that shows the comparative analysis of Mehran Sugar Mills
of Pakistan of past 5 years. Now this report is complete, it can be viewed for assessment.
The report was written for the subject “Financial Management” in order to understand the
basic concepts of finance in a more practical way. Sugar industries has suffered a lot during the
period of 2007-08 and it shows that how company has performed during these years.
Thank you for the opportunity to prepare this report. We hope this report will fulfill your
expectations from us regarding this course.
Sincerely,
TUBA IQBAL

2

................................................................................................................................................................................................................................................................................................................. 9 Equity Ratios: .................................................................................................................................................................................................................................................................................................. 5 RATIO ANALYSIS: ............................ 8 Gross profit margin: .......................................................................................... 11 3 ............................... 7 Day’s sales outstanding:......................................................................................................................................................................................................................................................................................................................... 6 Total debt to total asset: ................................................................................................... 8 Profitability Ratios:......................................................................................................................... 10 PROFITABILITY RATIOS: ............................................................................................................................................ 7 Inventory turnover Ratio: ...................................................................................................................................................... 7 Efficiency Ratios: ......................................................................... 8 EBIT margin: ...................................... 11 EQUITY RATIOS:............... 9 Price/Earnings Ratio: ......................................... 6 Current Ratio: ....... 6 Leverage Ratios: ................. 6 Quick Ratio: ............................................................................................................................................................................................................................................................................................................................................... 9 RATIO ANALYSIS EXPLANATION: ............................................................................................................................................................... 10 LIQUIDITY RATIOS: ...................................................................................................................... 7 Fixed assets turnover: ........................................ 8 EBT Margin: ............................................................................................... 6 Liquidity Ratios:.................................................... 11 VERTICAL ANALYSIS: ......................................................... 9 Return on common equity: ....................................................... 9 Return on assets: .......................... 1 INTRODUCTION: ................................................................................ 9 Market/Book Ratio:.......................................................................................................................................Table of Contents Letter of transmittal ........................................................................................................................... 10 EFFICIENCY RATIOS: .................................................................................................................................................................................................................................................................................................................................................... 8 Profit margin: ............. 10 LEVERAGE RATIOS: ......................................................................................................................................................................... 6 Times interest earned: ............................................................................................................................................................................................................................................................................................................ 7 Total assets turnover: ....................................................................................................................................

.................................................................................. 21 THREATS ........................................................................................... 11 INCOME STATEMENT: ...................................................................................... 21 RECOMMENDATIONS: ... 21 WEAKNESSES................................................................... 21 OPPORTUNITIES ........................................... 20 SWOT ANALYSIS: ................................................... 20 Cash from Operating Activities: ................................................................................................ 14 HORIZONTAL ANALYSIS: ............................................................................................................................................................................................................................................................................................. 19 CASH FLOW ANALYSIS: .................................... 20 Cash from Financing Activities: .................................................................................................................................. 21 STRENGTHS: ...................................................................................................................................................................... 22 APPENDICES 4 ............................................................................................................................................................................... 15 INCOME STATEMENT: ...........BALANCE SHEET: ................................................................................................................................................... 20 Cash from Investing Activities: ............................................................................................................................................................................................. 15 BALANCE SHEET: ..................................................................................................................................................................................................................................................

This has incurred heavy revenue losses to the national exchequer. Most of the mills in Pakistan are running at below 50 per cent of their capacity thus lifting cane from other mills to meet the requirements. This is mainly due to the set up of de-zoning of the sugarcane growing area and the unplanned setup of large number of sugar mills. Ministry of Trade and Commerce.4 per cent. For the last several years sugar industry has been governed by both the provincial and federal government. This has also left the mills uncompetitive and has incurred heavy losses to them. The main reason for lower production was shortage of irrigation water. throw the sugar in the market and claim consequently political mileage. Agriculture and Livestock. Heavy taxes on white sugar production have restricted the mill sector to compete for available cane supplies and has led to the under utilization of the capacity. Both the federal and provincial government seemed to be treating it as a more of trade management problem. Due to the involvement of different federal ministries and provincial government sugar industry underwent into different crisis.1 per cent lower than last year. The government raid stocks. There was lack of coordination in policy and pursuits within the government and of the sugarcane cultivating provinces. The government failed to come up with any long term policy for the improvement of sugar industry. Ministry of Finance.needing administrative solutions. At the federal level it is dealt by various ministries like Ministry of Food. There was an agreement of leasing a land between government and sugar industries for 30 years and the period was completed in 2007 so to renew that agreement companies had to bribe the government which incurred great expenses to them.INTRODUCTION: In Pakistan the sugar industry is to a greater extent based on sugarcane production without a nominal percentage of sugar beet. less use of DAP and nonpayment of dues to farmers by sugar mill owners on time. since being a sugar industry there was a shortage of sugar in the country and these sugar mills made huge amounts of profits by raising the prices 5 . Overall profits increased on the whole. etc. The present de-zoning emboldens farmers to sell their inferior quality sugarcane to any mill they like. The government policy towards sugar sub-sector had been always on adhoc basis. Refined white sugar obtained from sugarcane is the largest chunk of sweetening industry in Pakistan. In the fiscal year 2008-09. seize them. shifting of area to rice crop. an increase of 16. Pakistan is the fifth largest sugarcane producing country and the total production during the financial year 2007-08 was 64 million tons as compared to 55 million tons in the fiscal year 2006-07. sugarcane has been sown in the area of 1029 thousand hectares. 17.

212.59:1 2010 707.173 0.634.5% 85.222.836.721.118.740.048.325/482.444.763. there was no effect on the demand of the sugar and people were ready to pay high prices for sugar. RATIO ANALYSIS: Liquidity Ratios: Current Ratio: Current assets/Current liabilities 2006 2007 290291883/326369486 206.999 0.129 430.400.386.057.046.149 71.794 763.89:1 2010 707.2% 70.28:1 2008 588.161.1% 69.899-437.899/712. They did this by hoarding the sugar and sugar being the necessity.433-118.367.329 645.822.822.173 0.twice or thrice as much as before.325-141.348 326369486 206.566 712.999 0.367.838 320.976 751.129 0.400.306 0.46:1 0.605 1.790 1.89:1 2008 2009 588.721.394 784.741.744 482.161.8% 6 .735.64:1 0.21:1 2009 430.5% 84.306 0.296.775-253.046.589.60:1 Leverage Ratios: Total debt to total asset: Total debt/total asset 2006 2007 2008 2009 2010 577656978 807.94:1 Quick Ratio: Current assets-inventories/current liabilities 2006 2007 290291883-139.801.635 1.015.775/751.391.433/320.83:1 0.741.459.976.692 1.048.515 1.191.

495 688.832.093 393.592.617 1.858 / 360 90.238 1.592.288.057.528 271.31 times 2.960.766.077 3.858 141.841.160 68.446 556.989+563.976 14.719.5 days Fixed assets turnover: Sales / Net fixed assets 2006 2007 2008 2009 2010 1.718)/57.88 times 36 days 2.631+785.649 1.862.617/ 360 30511612 + 654566 1284440469 / 360 112.440.32 times Efficiency Ratios: Inventory turnover Ratio: Sales/Inventories 2006 2007 2008 2009 2010 1.893.836.820.387.740.773.79 times 2.13 times 21 days Day’s sales outstanding: Receivables/(Annual sales/360) 2006 2007 2008 2009 2010 57.7 days 17.344.284.1 times (0.560.74 times 7 .983+413.344.5 times 3.404.387.101.445.426+961.638.838 1.858 3.167.284.592.13 times 3.469 2.387.023.81) times 1.445.03 times 35 days 10.939.440.15 times 5.9 times 53 days 15.841.259 602.94 times 87 days 16.58 times 4.469 437.238 139.243 2.960.288.348 1.744 3.Times interest earned: EBIT/Interest charges 2006 2007 2008 2009 2010 145.7 days 9 days 8.473 3.374 3.288.807 253.310 1.736/73.223/65.386.072.028.807 517.682/43.719.344.959.313 (46.333.713 1.566 2.445.800.617 118.960.841.05 days 8.719.396.238 / 360 31.296.081.807/ 360 10.295/46.

469 5.592.858 3.502) 1.469 4.04% ( 110.344.36% 271.238 5.635 1.719.43 times 1.736 3.878) 1.391.469 2.832.841.858 16.1 times 2.807 807.592.592.63%) 68.719.617 (3.081.404.295 1.394 1.719.56%) 60.Total assets turnover: Sales / total assets 2006 2007 2008 2009 2010 1.445.387.960.118.767 1.617 (0.29% 321.067.288.459.223 2.576.619 2.238 1.2 times Profitability Ratios: Gross profit margin: Gross Profit/Sales 2006 2007 2008 2009 2010 188.494.356.387.807 12.69 times 1.807 10.912 1.858 11.288.23% 393.617 (8.778.238 7.634.445.284.284.44% ( 46.718) 1.440.841.565 1.13 times 2.284.288.960.919 3.71% 245.36% EBIT margin: EBIT/Sales 2006 2007 2008 2009 2010 145.682 1.57%) 118.589.001 2.862.344.36% EBT Margin: EBT/Sales 8 .440.344.387.564.46% 474.472 3.238 9.37% 393.807 8.469 9.23% 2006 2007 2008 2009 2010 98.693.841.440.820.329 763.735.960.444.129.360.617 1.445.149 2.692 1.440.982 1.284.288.61% ( 7.922.858 10.445.592.719.960.191.841.387.344.

841.851.73% 241.851.93 3.265 1.912.634.375.078) 57.7% 46.9% 763.986.329 (86.787.238 1.445.375.592.912.078) 57.807 4.719.359 34.493 807.7 4.789 175.735.692 (11.778 333.149 13.288.83 60.37% 6.3% Return on assets: Net income available to common stockholders/ Total assets 2006 2007 2008 2009 2010 79.960.986.781.078) 118.440.635 15.265 1.394 4.9% 9.469 2.8% 175.31 57.284.891 175.191.7/8.Profit margin: Net income available to common stockholders/ Sales 2006 2007 2008 2009 2010 79.912.617 1.681.351 ( 86.04 -1.411.52/16.120 241.375.493 229.265 522.7% -73.778 1.07% -6.11 15/(8.84 4.802.6% 52.493 ( 86.3% Equity Ratios: Price/Earnings Ratio: Price per share/Earnings per share 2006 2007 2008 2009 2010 24.898 57.414.36%) Return on common equity: Net income available to common stockholders/ Common equity 2006 2007 2008 2009 2010 79.73% 4.858 3.778 241.25/5.3% 32.87 3.781.118.589.986.391.781.02/12.459.344.387.444.891 175.82) 28.4 Market/Book Ratio: Market Price per share/book value per share 9 .891 1.47% 7.851.

while they have improved their efficiency by selling out its inventory early.25 1. It is also because of no imported sugar during that year the amount of current assets gets down and it further decreases cash balances. This is why in 2007 and 2008 the company’s abilities to pay off its interest decline and otherwise its position gets better & they were able to pay their interest charges with available EBIT more easily.787.25/17. Company is converting its 2.In past 5 years.5 times of total assets in sales which shows its less 10 . due to the low cane purchase which yields to the less sugar production makes the ratio less than that of other years.351/9843750 118.12 1.0.25 57.03 28.34 15/12.34 12.802. 70% of assets are funded by the creditors but in 2007 and 2008 share capital remains same as that of 2006 whereas total liabilities gets increased and prominently trade payables and deferred taxation share the big portion cohesively. whereas the large amount of trade debt presents that it took comparatively more days in recovering it. EFFICIENCY RATIOS: Inventory is being sold out in 30-40 days but in 2008 due to the high level of stock in trade it got up to 87 days which is because of hoarding of sugar in that period.02/28.359/14293125 23.55 MV/BV 2006 2007 2008 2009 2010 24. Receivables are being collected in 10 days. LEVERAGE RATIOS: According to the debt ratio.411.7/23.06 1. 2009 and 2010 Mehran Mills has more amounts of liquid assets than the stock in trade while in 2007 and 2008 the ratio depicts that more than half of the amount was stuck in inventory. 1 of liabilities but in 2007.8 of assets to pay of its Rs.86 28. They are able to utilize their plants and equipments 3.414.898/9843750 175.58 2.86 60.789/9843750 333.03 17.25 36.55 1.57 RATIO ANALYSIS EXPLANATION: LIQUIDITY RATIOS: More or less the current ratio of the mill remains same and they were approximately Rs. quick ratio of the company shows that in 2006.5 times in converting it sales but because of sugar crisis in 2007 and 2008 they showed under utilization.52/36.120/11812500 522.681.Book value per share: Common equity/Shares outstanding 2006 2007 2008 2009 2010 229.

faces loss which decreases it’s all other ratios. while in 2007 co.333% .57% - - Long-term investment 9. VERTICAL ANALYSIS: BALANCE SHEET: 2006 2007 2008 2009 2010 Property.026% .79% 48.046% . plant and equipment 48. is able to get high profits and shows better performance due to achieve the milestone of sales of all times. In 2010.91% 12.178% . interests are high because the co. Then operating expenses and interest expenses absorb app.trade 17. co.57% 3.01% 3.83% 54.97% 35.86% Long-term receivable 5.39% 3.769% Stores and spare parts 3.284% .26% 5.e.31% 15.7% 45. Unicol production also affects the company’s reputation and its market price got up.34% 11.15% Long-term deposits 0. 4% of gross profit. from purchase of sugarcane to manufacture the sugar.57% 10.68% 12.63% ASSETS N O N -CURRENT ASSETS CURRENT ASSETS 11 .50% 36. is 70% debt financed.782% .23% Biological assets - 0.043% 0. fixed assets got increased but it was not utilized to its full capacity.in.38% 5.63% 14.3% 15.35% 3.28% Stock. PROFITABILITY RATIOS: The greater portion of sales is consumed in cost of goods sold i.utilization of current assets while in 2010. Returns on assets and equity also got up in 2009 and 2010. EQUITY RATIOS: Due to the company’s efficient performance and its increased sales cohesively affect the market price of its shares and shareholders’ equity value increased.

728% 4.092% 0. subscribed and paid-up capital 12.56% 8.103% 0.26% 10.276% 2.87% Trade deposits and short-term prepayments 2.18% 3.28% 3.6% 7.27% 21.48% 14.35% - - Long-term financing 6.49% 5.61% 6.289% .085% 0.49% 19.117% 0.44% 0.27% 2.406% 0.18% 4.051% 0.106% 0.37% 2.56% 10.87% Subordinated loans 5.45% 0.58% 2.55% TOTAL ASSETS 100% 100% 100% 100% 100% Issued.19% 12.02% 5.139% .156% 2.27% Income tax recoverable 0.137% Other receivables 0.07% 2.218% Loans and advances 1.934% EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES N O N -CURRENT LIABILITIES 12 .1199% 6.24% Reserves 16.076% - Cash and bank balances 3.055% 0.39% 0.127% 5.148% 0.032% Short-term investments 0.12% 19.71% 1.28% 0.74% Liabilities against assets subject to finance lease 0.89% 8.Trade debts 7.78% 10.66% 11.04% 0.86% 1.

854% Sales tax payable 3.05% 6.55% TOTAL EQUITY AND LIABILITIES 100% 100% 100% 100% 100% CURRENT LIABILITIES In assets major portion is covered by plants and equipments.3% 13.46% 0.7% Provisions 12. inventory and in certain years (2008.95% Mark-up accrued on loans and other payables 3. In 2009 and 2010 long term investment has also share the big chunk of assets and company goes through the 13 .83% 6.87% Trade and other payables 7.917% 0.09 and 10) with the short term investment.097% 0.Deferred liabilities 7.3% 1.33% Deferred taxation - 2.196% 0.92% 1.154% 3.01% 10.94% 7.3% Provision for market committee fee - - 2.74% 27.425% Current portion of long-term financing 3.36% 1.435% 0.18% 37.61% 11.766% 0.51% 1.40% 14.114% 0.73% Current maturity of liabilities against assets subject to finance lease 0.79% 16. In 2008 company was holding investment in quoted securities which were available for sale that enhances co’s short term investment during the year.744% 2.08% 2.98% 3.53% 0.82% 0.88% Income tax-net - - - - 0.08% 4.47% 0.119% 0.37% 10.92% 1.78% 34.26% 2.69% 1.623% Short-term borrowings 21.66% 6.85% 6.

92% 2.57%) 9. Long term financing in PICIC and My bank were increased during the year 2007 which lead to the enhancement of its proportion in liabilities and equity.92% Profit (Loss) before taxation 5. 08.242%) (0.investing in the long run.248% 2. In 2006.4% 2.048% Finance costs 2.39% 4.117% 0. 09 and 2010 due to the accelerated tax depreciation and unabsorbed tax losses.48% 3. Deferred taxation was the part of 2007. Provisions also constitute large portion of liabilities which has quality premium to farmers and marketing committee fees.46% 12.043% 3.66% 0.77% 83.944% 1.526% 3.56%) 4.23% 0. Sales tax was also high during 2006 and 2007.15% 1.715% 10.06% 14 .36% Taxation 0.64% Gross (Loss)/Profit 9.256% 0.23% 0.225% 0.064% 0.54% 87.38% 100.5% 2. In 2009 and 2010 although the company’s share capital gets high but due to the overall increment in liabilities and equity the proportion of it remains low as compare to that of 2006.614% (0.216% 0.36% Distribution costs 0.045% (8.017% Share of loss from an associate - 0. INCOME STATEMENT: 2006 2007 2008 2009 2010 Net Sales 100% 100% 100% 100% 100% Cost of Sales 90. 08.205% 4.754% 1. 07 and 08.829%) 0. Whereas the reserves in 2007 and 2008 shows the lowest percentage of all times due to the loss faced in 2007.45% 2.972% (1.14% Administrative expenses 2.58% 2. 09 and 2010 got increased due to the increased amount in advances from customers and workers’ participation funds.74% 1.13% Other operating expenses 0.23% 16. 2007 and 2008 short term borrowing from banks were at peak and hence constitute large portion of liabilities.57% 90.869% Other operating income (0. Subordinated loans were not taken in 2009 and 2010.53%) 2. Trade payables during 2007.29% 8. During these years investment in Unicol unquoted company securities were increased which further lead to increment in long term investment.

37% 6.4% Biological assets - - - - Stores and spare parts 5.26% 65. HORIZONTAL ANALYSIS: {(Current year value – Base year value)/ Base year value}*100 BALANCE SHEET: 2006 2007 2008 2009 2010 6.07% (0.94% 148.3% Cost of sales was high in 2006.47% 7.6% 1039.trade (15.28%) 212.79% 120. high scrap sales and large exchange gain.1% Long-term deposits 0 (10.Profit(Loss) after taxation 4. deposits and long term receivables.84%) 468.067%) 4. Due to the loss faced in 2007 the large portion of net sales absorbed into finance cost during that year comparatively. While in 2008 administrative expenses were high because of increased salaries and wages.26% 117. But the operating expenses in 2009 were slightly up due to increase in provisions for doubtful debts.15% 134.114% 81.05% Long-term receivable 0 0 - - Long-term investment 17.87% 29.65% ASSETS NONCURRENT ASSET Property.8% 68. 2007 and 2008 but it went down during 2009 and 2010. plant and equipment CURRENT ASSETS 15 .76% 1.in.46% 7. Operating income of 2008 stands out due to the gain on disposal of fixed assets high amount.89% 115.37% Stock.

43%) 47.2% 132.92% 0 0 20% 45.6% 1404.56%) (77.9% 58. subscribed and paid-up capital Reserves N O N CURRENT LIABILITIES Liabilities against assets subject to 16 .67%) (93.8%) (41.5% 968.9%) (94.09% 188.88% Subordinated loans 3.1% 177.2% (84.2% 3010% - Cash and bank balances (91.75%) (94.94%) 328.33% 312.51% 114.01%) (89.36%) 93.14% 4862.41% 56.25% Loans and advances (32.59% 462.34% 36.57% 38.1% EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES Issued.199% 3341.58% Income tax recoverable 182.3% 73.02% 245% 285.5% 155.02% (32.57%) 81.78% 2403.41%) - - Long-term financing 205.13%) Other receivables 89.81 TOTAL ASSETS (5.Trade debts (46.1% Short-term investments 0 362.37% Trade deposits and short-term prepayments (41.12%) 64.39%) (47.

86% 20.46%) (90.51% 114.43% Provision for market committee fee - - - - Income tax-net - - - - Sales tax payable (12.62% 393.14% 20.51%) 17.53%) Short-term borrowings (50.6% Current portion of long-term financing 57.09%) (4.87% 669.77% 863.29% 18.35% 614.52%) TOTAL EQUITY AND LIABILITIES (5.98%) (91.43%) 47.59%) (70.99%) (90.72%) (56.finance lease Deferred liabilities (53.14% Trade and other payables 96.07% (55.56% 41.92% CURRENT LIABILITIES 17 .43%) (44.59%) (82.35% 12.28% (58.88% 29.23%) (36.56) Deferred taxation - - - - Provisions 2.035%) (59.72% Mark-up accrued on loans and other payables 25.14% 20.81%) Current maturity of liabilities against assets subject to finance lease 56.57% 38.

During the year 2009 and 2010 company invests in plants and equipments heavily as compare to that of 2006 which is done because of the increased demand. In 2009 and 2010 company issued some more shares which increased its share capital. Long term deposits also increased manifold during these years. As it was described earlier that company has invested in short term investments during 2008. 18 . It is shown that company has invested in long term investment in Unicol co. It also shows that company’s total equity and liabilities were increased in 2009 and 2010. Loans taken from banks also got up many times in the years 2008. 2009 and 2010 in comparison with 2006. Markup on accrued loans were less during 4 years which shows the good sign for company that they required to pay less amount as interests on loans. Liabilities against assets subject to finance lease were also very high. While cash balances in 2010 show positive with respect to 2006 cash balance that means company was able to hold much amount of money in the liquid form after 4 years. during 2009 and 10. 2009 and heavily in 2010 that’s why it is increasing abnormally.

98% Profit(Loss) after taxation (208.49% Share of loss from an associate - - - - Finance costs 23.29% 1435.93% 723.10% 499.15%) 120.77% 95.04% Net sales during 2007 and 2008 shows not the impressive performance of company as compare to that of 2006.99% 563.62% Taxation (223.56%) (38.03%) 39. In 2009 operating expenses were 19 .1%) 108.54% 89.62%) (83.28% 53.21%) 12.6% Other operating expenses (40.53% 151.19% 224.19% 57.74% Other operating income 43.76% 104.9%) (37. while in 2009 and 2010 net sales depicts the impressive change and it goes up.93% Cost of Sales (26.98% Gross (Loss)/Profit (103.21% 137.28%) 265.27%) (34.02%) 496.68%) (28.22% Profit (Loss) before taxation (211.86%) (34.127% 44.INCOME STATEMENT: 2006 2007 2008 2009 2010 Net Sales (34.91% 374.88% Distribution costs (16.01%) 34.49%) 21.23% 134. Cost of sales also got down during 2009 and 2010 which shows company’s effective performance and they able to increase their gross profit margin and hence their profit margin.3% 203.78%) 148.5% Administrative expenses 3.1% (7.89% 314.

09 and 10. In 2008. CASH FLOW ANALYSIS: Cash from Operating Activities: In 2006 generated cash from operating activities were very low as compare to that of other years because of no provision for additional tax on bagasse. Overall. Firm capital expenditure was also got increased due to the increased size of company capital. In 2010. this is because of negative amount of cash generated from investing and financing activities. Its short-term investment in 2008. Working capital changes in 2007 also share the major chunk of cash. 2009 and 2010 also gets up which lead to the high amount of negative cash balance at the end of investing activities. due to the loss faced in 2007. in 2006 and 2010 show the positive balance at the end of years while in 2007. It’s after effects remained till two years and company borrowed large amount of financing from banks and paid off its interests. Finance costs and large working capital changes in 2009 and 2010 constitute large portion of cash from operating activities. 20 . liabilities and subordinated loans. 08 and 09 the net cash balance is in negative. Cash from Financing Activities: In 2007 long term financing were obtained but short term borrowings and dividends were paid out with this amount so the net effect brings out less cash generation from financing activities during that year. doubtful debts also increased which was added to the high amount of cash generated from operating activities. In 2008 and 2009 negative cash balance remains at the end of financing activities because of the payments of long term financing and dividends. 08. no share of loss from an associate and less amount of finance cost. long term financing was obtained which enhanced the cash generated from financing activities. provision for quality premium. As the company expands its plants get increased and so the amount of its depreciation which is a non-cash item and it enhances the cash generated during 2007.abnormally high and it was due to provision of doubtful debts and receivables which increased its ratio in comparison with that of 2006. Cash from Investing Activities: Net cash generated from these activities was in negative which shows that company has received fewer amounts of proceeds from its assets as it has invested in them and deposits. whereas in 2006 short term borrowings were obtained which increased its net cash generated from this activity.

SWOT ANALYSIS: STRENGTHS: -Most of population live in rural areas that’s why labor is cheap. ⁻Sucrose recovery rate is less than international standard OPPORTUNITIES -We can increase per yield production by using new technologies and fertilizers. THREATS -The production of sugar cane decreases the productivity of land. -We can shift towards beet production as it is more cheaper. -Large domestic market is available. increase in production may create shortage of water for other crops 21 . ⁻Farmers are using old technology for production. ⁻We do not tune-up boilers periodically that causes emission of gases. -Cultivatable land is available for the production. -As sugar cane crop requires a lot of water. -We can earn foreign exchange by exporting surplus sugar. -Rather than exporting raw material we can add value to it. ⁻Low yield. WEAKNESSES We do not have proper recycling system which results in high water consumption.

22 .  Liquidity position can be further maintained in the better way by holding cash more and liquid assets in company’s account.  Water irrigation should be enhanced and it should be utilized properly in order to sown the crop properly and hence got the great production of sugar.  Short term borrowings can also be minimized.  Inventory turnover are impressive during 2010 and they should continue their practice.RECOMMENDATIONS:  They should control their finance cost and increase their EBIT to pay off its liabilities quickly.  Long term financing should be controlled so that they could hold lump sum amount of money at the end of year in cash.  Operating expenses and administrative cost should be controlled. which can improve liquidity position.

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