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Silverstone
This chapter is based on the financial analysis of the company. First the
accounting polices of the company is given, and then the financial analysis of
the company is explained by using different financial ratios.
These accounts have been prepared under the historical cost convention in
accordance with the schedule “ v” of the companies ordinance, 1984.
These are stated at cost less accumulated depreciation, except land leasehold
which is stated at cost. Depreciation has been charged by applying reducing
balance method at the normal rates. Full depreciation will be provided on
additions, irrespective of the date of additions.
6.1.5 Figures
The financial ratios upon which the for-going analysis is going to be based can
be categorized in three broad categories.
a. Profitability Ratios
c. Liquidity Ratios
Financial Analysis
Silverstone
CURRENT LIABILITY
1. Current portion of long term
CURRENT ASSETS
1. Store and spares 19,509 98,148
OPERATING EXPENSES
Unappropriated brought
Unappropriated carried
PROFIT MARGIN
3.71%
0.04 3.34%
0.035
0.03
0.025
0.02 Series2
0.015 Series1
0.01
0.005
0
0
1 2
2000 2001
As obvious the profit margin has increased from 3.34% to 3.71. This is
due to the increased income in 2001.
Financial Analysis
Silverstone
Net Income
2. Return on Asset = Total Assets
2,328 ,039
2000 = =10 .67 %
27 ,428 ,219
3,858 ,960
2001 = =11 .939 %
32 ,341 ,651
RETURN ON ASSETS
12.50%
11.94%
12.00%
11.50%
11.00%
10.67%
10.50%
10.00%
2000 2001
Net Income
3. Return on equity = Equaity
292 ,8039
2000 = =0.0673 %
43 ,497 ,078
3858 ,960
2001 = =0.081 %
42 ,356 ,038
RETURN ON EQUITY
0.09
0.081%
0.08
0.0673%
0.07
0.06
0.05
0.04
0.03
0.02
0.01 0
0
2000 2001
Return on Equity has increased from 0.067% to 0.08%. this is due to the
more income in 2001 as compared to 2000.
Financial Analysis
Silverstone
87 ,480 ,227
2000 = =13 .1 Times
6672 ,692
RECEIVABLES TURNOVER
0.14
13.10
0.12
0.1
7.63
0.08
0.06
0.04
0.02
0
0
1 2 3
2000 2001
The Receivable Turnover ratio has been decreased during the financial
year 2001 as compared to that of financial year 2000. The net change
observed is 5 times, which shows that the conversion of receivables into
cash has been decreased for the year.
Financial Analysis
Silverstone
A/ R
Average Collection Period = Average daily Credit Sale
667 ,2692
2000 = = 27 Days
239672
13 ,624 ,107
2001 = =47 Days
284892
47
50
40
27
30
20
10
0
1 2
2000 2001
Sale
3. Inventory turnover = Inventory
87 ,480 ,227
2000 = =6.51 Times
13 ,419 ,871
INVENTORY TURNOVER
7.8 7.63
7.6
7.4
7.2
7
6.8
6.6 6.51
6.4
6.2
6
5.8
2000 2001
The inventory turnover ratio has been increased during the year 2001.
Net change is 1 times, which shows the greater efficiency of the
organization.
Financial Analysis
Silverstone
Sale
4. Fixed Asset Turnover = Fixed Asset
87480 ,227
2000 = = 2.046 Times
42 ,749 ,333
103967467
2001 = = 2.14 Times
48 ,499 ,991
0.025
2.05
2.14
0.02
0.015
Series2
Series1
0.01
0.005
0 0
2000 2001
The fixed assets turnover has been increased slightly during the year
2001 as compared to that in 2000, which is a good sign for the
organization.
Financial Analysis
Silverstone
Sale
5. Total Asset Turnover = Total Asset
87 ,480 ,227
2000 = =1.23 Times
20 ,848 ,692
0.014
0.012
1.23 1.26
0.01
0.008
0.006
0.004
0.002
0
2000 2001
The total assets turnover of the organization has also been slightly
increased during the financial year 2001 as compared to that in financial
year 2000. The total assets turnover ratio for the period is 1.26 times,
which was 1.23 times in 2000, which shows the better performance for
the year.
Financial Analysis
Silverstone
27 ,428 ,219
2000 = =1.68 Times
16 ,249 ,041
2001 =
QUICK RATIO
0.01
0.86
0.008
0.65
0.006 Series1
Series2
0.004
0.002
0
0
2000 2001
The quick ratio of the organization has been decreased for the year
2001. The net change is 0.21 times, which shows that the most liquid
assets of the organization has been decreased for the year.
Analyzing the Income Statement and Balance Sheet of the company for the
year 2000 and 2001. We see a drop on the receivable turnover ratio from 13.1
to 7.63. The sale and receivables to increased but not in that proportion as in
2000. This is due to the increases rate on credit , which has caused the
receivables to increase.
The inventory turnover, has increased from 0.51 763 the figures shows that the
sale has been increased but at the same time the inventory has increased and is
not maintained in that efficient manner as were in the year 2000.
Fixed asset turnover has increased from 2.01 to 214, which shows in forced
asset evolution. This is because of the fact total asset turnover has also
increased from 1.23 to 1.26 again the fact in the increase in the sale in 2001.
Profit margin shows increase from 3.34% to 3.71. The figure shows a high
increase in the sale, but at the same tine the company has increases its profit
Financial Analysis
Silverstone
margin this is because that sale has increases and increased sale means high
production and high promotion means, low manufacturing cost, and low
manufacturing cost means high net income and high net income means high
profit margin. The same thing is pronounced by the ratios of return on asset,
and return on equity. In both the cases at has increased in 2001 as compared to
2000, which is as stated above is because of the improvement net income.
As the Calculations shows that current and quick ratio has been decreased.
The current ratio is decreased from 1.68 to 1.12 and which ratio has been
decreased from 0.86 to 0.65. This is because that current liabilities has
increased and the reason for increase in current liabilities is due to the use of
increased raw materials on credit, which was required for the high production
as needed for increased sale in the year 2001.