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Gul Ahmed Textile Mills Pvt. Ltd.

(Brief Recordings)
ANALYSIS OF FINANCIAL STATEMENTS (FY 2001 FY 2010)

G
Sales:

ul Ahmed Textile Mills Ltd. was incorporated as a private limited company, in the year 1953. In 1972 it was subsequently listed on the Karachi Stock Exchange. Since then the company has been making rapid progress and is one of the best composite textile houses in the world. The mill is presently a composite unit with an installed capacity of 130,296 spindles, 223 wide width air jet looms, and a state of the art processing and finishing unit in Landhi Industrial Area Karachi. In addition Gul Ahmed has 16 outlets in different parts of the country.

have been increased which is a major factor for liquidity. If the inventories will be selling and amount received quicker the firm is more liquidated. Current ratio has been increased from 0.98 to 0.99 for FY2009- 2010. However, Quick ratio has decreased from 0.42 to 0.36.

3. Capital Efficiency:
Total assets turnover is high throughout the decade. It shows that the total assets contribute in generating sales revenue to the company. TATO has increased from 2.38 times to 3.27 for FY 2009-2010. Inventory turnover has also increased from 3.37 to 3.70 times in FY 2009-2010, which is an indication of high sales and generating revenue to the company.

Sales has been increased from 2001 to 2010 by 394%. It has increased gross profit to 260%. However, the increase in cost of sales, distribution expenses and finance cost were the main factors eroding the profit margins. The profit before taxation is increased to 137%. In the current economic environment it is important for the Company to not only maintain but also improve the liquidity position. Despite the need for improved liquidity the Directors proposed dividend of 12.5% (Rs. 1.25 per share of Rs. 10 each).

Common Size Analysis: 2. Profitability:


Profitability of the company has been decreased. Gross Profit Margin has decreased from 16.81% to 16.12 from FY 2009 to 2010. Net Profit Margin has increased from 0.58% to 2.43% from FY 2009 to 2010. Common Size analysis shows that the net income of the firm has decreased from FY 2001 to FY 2010. Similarly there is a decrease in gross profit margin and net profit margin. COGS have been increased due to inflation and economic crisis in the country. Company has lessen the long term loans but receivables have been decreased which resulted in a high inventory turnover. Company has not invested in projects in FY 2010.

4. Financial Gearing:
Debt-to-equity ratio is indication of the relative proportion of shareholders' equity and debt used to finance a company's assets. Debt-to-equity ratio has decreased from 0.98 to 0.81 for FY 2009-2010. This shows that the company has lessen the debt as compared to shareholders equity. It was however much higher from FY 2004-2008.

Indexed Analysis:
Index Analysis shows that sales have been increased remarkably by 394% from FY 2001 to FY 2010. There is increase in gross profit margin but no change in net income. There is an increase in assets, showing investments done by the company. Company liabilities have been increased during the decade by 246%. Receivables have been increased which shows the company liquid position has decreased a little bit.

Industry vs Gul Ahmed Textile Mills Performance:


Below is the Gul Ahmed performance compared with Industry performance. Financial performance for the decade is illustrated after.

Future Outlook:
Return on assets has been increased from 0.58% to 3.23% from FY 2009 to 2010. Return on equity is also increased from 2.12% to 12.22% for FY 2009-2010. This means that the company is getting more return from assets and shareholders equity. Gul Ahmed Textile Mills Pvt. Ltd. is looking for a sustainable market growth and market share. Sales have been increased but cost of goods sold has also increased due to shortage of cotton and other raw materials, as the affect of floods. Company can increase the debt to raise the sales and net income. Gul Ahmed Textile has invested Rs 484 million in projects which will give benefit to the company in long terms. Company has opened many outlets and a lot more is needed for increase in sales.

5. Market Performance: Financial Performance (2001-2010):


Financial performance of Gul Ahmed Textile Mills is given below: EPS has remarkabely increased from Rs. 1.45 to Rs. 7.52 for FY 20092010. P/E ratio has decreased from 26.79 to 2.46 for FY 2009-2010. Dividend Payout ratio is decreased which means that company has given dividend from the net income in less ratio than in previous years. Dividend cover ratio has increased from 1.87 in FY 2008 to 6.02 in FY 2010.

Prepared By: Muzammil Shahabuddin Student of MBA (Executive) STD ID: 2010-3-45-10969 Institute of Business Management Disclaimer: No reliance should be placed on the [above information] by any one for making any financial, investment and business decision. The [above information] is general in nature and has not been prepared for any specific decision making process.

1. Liquidity
Gul Ahmed has less liquid in terms of assets. By the ratios analyzed below it is clear that the current assets were more than current liabilities from 2001 to 2006. However in recent years the ratio of current assets to current liabilities is equal. Similarly, the inventories