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Vision & Mission Statements

Vision
To be a leading national enterprise with global aspirations, effectively
Pursuing multiple growth opportunities, maximizing returns to the stakeholders, remaining socially and ethically
responsible.
Mission
To provide our customers with premium quality products in a safe, reliable, Efficient and environmentally sound manner,
deliver exceptional services and customer support, maximizing returns to the shareholders through core business and
diversification, providing a dynamic and challenging environment for our employees.

Introduction to prtoject
Pakistans economy is an agricultural based and its importance is well established in the country. It plays an important
and vital role in the growth of the economy, its activity, generating revenues/foreign exchange and in the development of
the industrial sector of the country. It provides raw material to the industrial sector of the country like sugar, cotton,
textile, foods, jute, tobacco and other industries and regarded as a backbone of the Pakistan s economic activity. It is
contributed almost 21% of the Pakistans GDP and employs about 41% of the total labor force. Fertilizers have played an
important role in the growth and development of the agricultural sector especially to meet the growing demand of the food
and to achieve the self sufficiency level. Keeping the importance of fertilizer sector in my mind, I have choosen fuiji
fertilizer company for my project of financial Ratio Analysis.

Introduction of the company:


FAUJI FERTILIZER CO. LTD. Fauji Fertilizer Company Limited (FFC) is Pakistan's leading urea manufacturing
company with over 60% market share. It is principally engaged in the production, purchasing, and marketing of fertilizers
and chemicals. It offers ammonia/urea under the brand name Sona , as well as nitrogen, phosphate, and potash based
fertilizers with a vision to acquire self - sufficiency in fertilizer production in the country, FFC was incorporated in 1978
as a private limited company. This was a joint venture between Fauji Foundation (a leading charitable trust in Pakistan)
and Haldor Topsoe A/S of Denmark. The initial share capital of the company was 813.9 Million Rupees. The present share
capital of the company stands above Rs. 8.48 Billion.

Introduction to Problem:
Stock investing and consistency in financial performance requires careful analysis of financial data to find out the
company's true worth. This is generally done by examining the company's profit and loss account, balance sheet and cash
flow statement. This can be time-consuming and cumbersome. An easier way to find out about a company's performance
is to look at its financial ratios.

Research question
Whether companys performance is consistent to make investment in the company?

Objective:
Ratio analysis is an integral part of the financial statement analysis and it is most widely and powerful tool used to analyze
the companys financial statements. The main objective of ratio analysis is to deeply analyze the information provided in
the financial statements and present meaningful results in terms of liquidity, solvency, activity and profitability of the
company in a relative form.
Hence, the main objective of the project is to facilitate all the stakeholders especially the investors and bankers to evaluate
the ability that how effectively and efficiently it manages its operations and resources/assets and to know the activity
position of the selected company. This Project will also state the reasons that why the company are able and not able to
manage their assets effectively. The Project will also enable the investors and the other stakeholders to make the decision
to invest.

Significance
The project will provide very significant, rich and valuable information for all the stakeholders, financial analysts and the
students as well. Study of the project will become enable to identify the company past and current performance with
respect to the management of their resources and further will lead them to paint the future growth of the company on the
bases of the facts, figures and analysis provided in the project within the limit of financial ratio. This project will give
them solid analysis in a graphical and tabular form with an interpretation and conclusion drawn on bases of facts and
figures and allow them to take decision whether it is better to invest.

Data Source
Data Collection Sources

This project is based upon the primary sources of data and logic is that annual reports or company statements are treated
as secondary source of data and the whole project is based on companys annual reports and financial statements.
Secondary Sources Companys annual accounts report and their official sites has been consulted and used as a secondary
source to collect the basic and necessary information like financial statements, company profile, introduction, business
activity, and their vision and mission statements. Articles, books, stock exchange, brokers and different sites has also been
considered as secondary source available on the internet or in a physical form to collect the raw data and information as
much as possible on the topic selected in order to get a nice and comprehensive shape of the project.

Increase in Assets
Current assets include trade debts, stock,short term investments and cash & bank balances. With an aggregate balance of
Rs.35.88 billion at the end of 2014, the assets recorded an increase of Rs. 20.97 billion since 2009, mainly on account of
increase in short term investments, under Company policy for placement of surplus funds in term deposits for generation
of incremental.
Current liabilities
Current liabilities of the Company increased from Rs. 17.86 billion in 2009 to Rs. 53.82billion in 2014, primarily on
account of retained GIDC obligations, increase in short term borrowings and customer advances which is fairly in line
with the Companys growth and changes in its operating cycle.
Non-current liabilities
Total non-current liabilities comprising of long term loans, deferred taxation and long term portion of compensated leave
absences, have remained fairly constant during the past 6 years. Long term loans reduced by Rs. 1.78 billion during the
year on account of repayment ,while deferred liabilities increased by 12% compared to 2013. Long term financing has
been utilized for asset

Methodology
Ratios simply mean a number expressed in terms of another. A ratio is a statistical yardstick by mean of which relationship
between two or various figures can be compared or measured. Thus Ratio Analysis shows the relationship between
accounting data. Ratio can be found out by dividing on number by another number. Ratio analysis is an important and age
old technique of financial analysis. Following are some of the advantages of ratio analysis.
Advantages:
It simplifies the comprehension of financial statements.
Ratios tell the whole story of changes in the financial condition of the business.
It provides data for inter-company comparison. Makes inter-company comparison possible
Ratio analysis also makes possible comparison of the performance of different divisions of the company. The ratios are
helpful in deciding about their efficiency or otherwise in the past and likely performance in the future.
Ratios highlight the factors associated with successful and unsuccessful company. They also reveal strong companies and
weak companys, over-valued under-valued companies.
It helps in planning and forecasting. Ratios can assist management, in its function of forecasting, planning, co-ordination,
control and communications.
It helps in investment decisions in the case of investors and lending decisions in the case of investors and lending
decisions in the case of bankers etc.

Parameters used for Financial Analysis


The parameters used for financial analysis are the ratios of five different categories.
1. Profitability Ratio
I.
Gross Profit Ratio
II.
Net profit ratio
III.
Pre Tax margin ratio
IV.
EBITDA( Earnings before Interest,Tax,Depreciation and Amortization) Margin to Sales
V.
Return on Equity
VI.
Return on Capital Employed
VII.
Return on Assets

2. Liquidity Ratios
I.
II.
III.
IV.

Current Ratio
Quick Ratio
Cash flow from operation to sales
Cash to Current liabilities

3. Activity and turnover ratio


I.
Inventory turnover ratios
II.
No of days in inventory
III.
Debtors to turn over ratios
IV.
No of Days in receivable
V.
Creditors Turnover Ratios
VI.
No of Days in payables
VII.
Fixed Asset Turnover ratio

4. Investment Ratio/Market Ratio


I.
Earnings per Share Ratio
II.
Dividend yield Ratio
III.
Market Value per share
IV.
Breakup value per share
V.
Cash dividend per Share
VI.
Bonus shares issued
5. Capital Structure Ratios
I.
Debt to equity Ratio
II.
Interest coverage Ratio

GROSS PROFIT MARGIN


A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues
after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and
future savings.
Ratio
GPM

2014
%

38.29

2013
46.36

70

2012

2011

48.47

62.2

2010
43.6

2009
43.3

2008
40.4

2007
35.59

2006
32.42

2005
36.06

62.2

60
50
40

46.36

48.47
43.6

43.27

38.29

40.4
35.59

32.42

36.06

30
20
10
0
2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

The gross margin is not an exact estimate of the company's pricing strategy but it does give a good indication of financial
health. Without an adequate gross margin, a company will be unable to pay its operating and other expenses and build for
the future. In general, a company's gross profit margin should be stable. It should not fluctuate much from one period to
another, unless the industry it is in has been undergoing drastic changes which will affect the costs of goods sold or
pricing policies.
Ways to improve Gross Profit Margin Ratio
Reducing Cost of Goods Sold
Cheaper Raw material

Selecting low price suppliers


Modern technology to reduce Labour cost
Increase selling price

Net Profit Margin (NPM)


A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how
much out of every dollar of sales a company actually keeps in earnings.

Net Profit
Net Sales

Net Profit Margin =

Ratio
NPM

45
40
35
30
25
20
15
10
5
0

2014
%

22.37

2013
27.03

2012
28.07

2011
40.73

2010
24.58

2009
24.4

2008
21.33

2007
18.86

2006
15.48

2005
19.22

40.73

27.03

28.07

24.58

22.37

2014

2013

2012

2011

2010

24.4

2009

21.33

2008

18.86

2007

15.48

2006

19.22

2005

Net Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more
profitable company that has better control over its costs compared to its competitors.
Ways to improve Net Profit Margin Ratio
Reducing Cost of Goods Sold

Cheaper Raw material


Selecting low price suppliers
Modern technology to reduce Labour cost
Increase selling price
Reduce unnecessary administrative expenses
Reducing finance cost
Rise in cost of sales owing to increased raw material cost and GIDC resulted in a reduction in gross and net profit
margins for2014, depicting a decrease of 8% and 5% respectively from last year. Consequently, return on equity
(post tax) and capital employed were also lower by 9% and 4% respectively in comparison with 2013.

Pre Tax Margin


The financial ratio pretax margin is a measure of the operating efficiency of a company. Pretax margin only requires two
inputs from the income statement: revenues and income before taxes.
Pretax Margin (%) = (Income before Taxes / Revenues) x 100
Ratio
PTM

2014
32.3

2013
39.5

2012
41.78

2011
60.06

2010
36.35

2009
36.11

2008
32.82

2007
27.49

2006
23.26

2005
28.31

Higher pretax margins are desirable and indicative of management's ability to keep operating costs low. Investors and
analysts typically evaluate a company's pretax margin over time, looking for an increase in the measure. When drawing
conclusions about the relative performance of a company, benchmark comparisons should be made with competitors in
the same industry.

PTM
70
60
50
PTM

40
30
20
10
0
2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

Earnings before Interest, Tax, Depreciation and Amortization margin to sales


An EBITDA margin is a measurement of a company's earnings before interest, taxes, depreciation, and amortization as a
percentage of its total revenue. The formula for EBITDA margin is:
EBITDA Margin = EBITDA/Total Revenue

Ratio
EBITD

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

35.61

42.74

44.99

63.64

41.43

41.68

37.99

32.36

27.99

33.00

70
60
50
40
30
20
10
0
2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

Return on Equity ROE


The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's
profitability by revealing how much profit a company generates with the money shareholders have invested.
Return on Equity = Net Income/Shareholder's Equity

Ratio
ROE

2014
%

70.79

2013
80.05

120

80.96

2011
99.17

2010
71.4

2009
67.4

2008
53.11

2007
42.11

2006
35.78

2005
39.36

99.17

100
80

2012

70.79

80.05

80.96

71.4

67.44
53.11

60
40

42.11

35.78

39.36

2006

2005

20
0
2014

2013

2012

2011

2010

2009

2008

2007

Shareholder's equity does not include preferred shares. Widely used by investors, the ROE ratio is an important measure
of a company's earnings performance. The ROE tells common shareholders how effectively their money is being
employed. In general, financial analysts consider return on equity ratios in the 15-20% range as representing attractive
levels of investment quality.
Return on Capital Employed (ROCE)
The return on capital employed (ROCE) ratio, expressed as a percentage, complements the return on equity (ROE) ratio
by adding a company's debt liabilities, or funded debt, to equity to reflect a company's total "capital employed".
Comparing net income to the sum of a company's debt and equity capital, investors can get a clear picture of how the use
of leverage impacts a company's profitability. Financial analysts consider the ROCE measurement to be a more

comprehensive profitability indicator because it gauges management's ability to generate earnings from a company's total
pool of capital.

Ratio
ROC

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

64.5

68.41

70.38

88.6

57.25

50

36.94

34.81

32.76

90
80
70
60
50
40
30
20
10
0
2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

36.49

Return on Assets
Return on assets is the ratio of annual net income to average total assets of a business during a financial year. It measures
efficiency of the business in using its assets to generate net income.

Annual Net Income


Average Total Assets

ROA =

Ratio
ROA

0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
-0.05

2014
20.99

2014

2013

2013
29.68

2012

2012
34.38

2011
40.5

2010
25.61

2009
22.89

2010

2009

2008

2011

2008
20.44

2007

2007
18.33

2006

2006
16.9

2005
17.21

2005

Liquidity Ratios
Liquidity ratios analyze the ability of a company to pay off both its current liabilities as they become due as well as their
long-term liabilities as they become current. In other words, these ratios show the cash levels of a company and the ability
to turn other assets into cash to pay off liabilities and other current obligations.Liquidity is not only a measure of how
much cash a business has. It is also a measure of how easy it will be for the company to raise enough cash or convert
assets into cash. Assets like accounts receivable, trading securities, and inventory are relatively easy for many companies
to convert into cash in the short term. Thus, all of these assets go into the liquidity calculation of a company.
Current ratio:
CR known as liquidity ratio and working capital ratio, shows the proportion of current assets of a business in relation to its
current liabilities

Current Ratio

Current Assets

Companies would aim to maintain a current ratio of at least 1 to ensure that the value of their current assets cover at least
the amount of their short term obligations. However, a current ratio of greater than 1 provides additional cushion against
unforeseeable contingencies that may arise in the short term.
Current ratio must be analyzed over a period of time. Increase in current ratio over a period of time may suggest improved
liquidity of the company or a more conservative approach to working capital management. A decreasing trend in the
current ratio may suggest a deteriorating liquidity position of the business or a leaner working capital cycle of the
company through the adoption of more efficient management practices. Time period analyses of the current ratio must
also consider seasonal fluctuations.
Ratio
CR

2014
Proportion

2013

0.67

0.77

2012
1.14

2011

2010

1.04

2009

0.86

2008

0.84

2007

0.82

2006

0.94

2005

0.9

0.91

Current ratio for 2014 depicted a minimal decrease of 0.10 times as compared with 2013 due to increase in trade
creditors.
.
1.14
1.2
1
0.8
0.6
0.4
0.2
0

1.04

0.67

2014

0.86

0.77

2013

2012

2011

2010

0.84

2009

0.82

2008

0.94

2007

0.9

2006

0.91

2005

Quick Ratio, also known as Acid Test Ratio, shows the ratio of cash and other liquid resources of an organization in
comparison to its current liabilities.
Quick Ratio=

Ratio
QR

Cash in hand + Cash at Bank + Receivables + Marketable Securities


Current Liabilities

2014
0.59

2013
0.66

2012
1.01

2011
0.93

2010
0.73

2009
0.66

2008
0.54

2007
0.68

2006
0.61

2005
0.69

1.2
1
0.8
0.6
0.4
0.2
0
2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

Cash to current liabilities and cash flow from operations / sales witnessed an increase of 0.04 times and 0.06 times
respectively

Quick ratio is a measure of a company's ability to settle its current liabilities on a very short notice. Current ratio may
provide a misleading indication of a company's liquidity position when a considerable portion of its current assets is
illiquid. Quick ratio is therefore a more reliable measure of liquidity for manufacturing companies and construction firms
that have relatively high levels of inventory, work in progress and receivables.
Assets Turnover Ratio
Ratio
ATR

Times

2014

2013

2012

117.11

111.96

117.1

2011
149.5
4

2012

2011

2010

2010
125.9

2009

2008

103

2007

58.73

118.8

2006
105.6

150
100
50
0
2014

2013

2009

2008

2007

2006

2005

2005
137

Cash flow from operation to Sales


Ratio
CFS
CFFO
Sales

2014
0.36
29090
81240

90000
80000
70000
60000
50000
40000
30000
20000
10000
0
-10000

2013
0.34
25270
74481

2012
0.25
18646
74323

2011
0.35
19558
55221

2010
0.33
14769
44874

2009
0.25
8918
36163

2008
0.27
8166
30593

2007
0.21
5914
28429

2006
-0.01
-396
29951

2005
0.24
6177
25481

Cash Flow
Sales

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

Activity Ratios

Inventory Turnover
A ratio showing how many times a company's inventory is sold and replaced over a period. The days in the period can
then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory
turnover days."
Ratio
ITOR

2014
Times

148

2013
188

2012
152

2011
162

2010
283

2009
236

2008
55.20

2007
25.54

2006
29.31

2005
47.47

300
200
100
0
2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

No of Days in inventory
A ratio showing how many times a company's inventory is sold and replaced over a period. The days in the period can
then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory
turnover days."

Ratio
NDI

2014
Days

2013
2

2012
2

2011
2

2010
2

2009
1

2008
2

2007
7

14

2006
12

2005
8

No of Days in inventory
14
12
10

No of Days in inventory

8
6
4
2
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

Inventory turnover days were in line with past trends at 2 days.


Debtors turnover Ratios
Debtors turnover is the ratio of net credit sales of a business to its average accounts receivable during a given period,
usually a year. It is an activity ratio which estimates the number of times a business collects its average accounts
receivable balance during a period.

Ratio
DTR

2014

2013

107

2012
35

2011
40

248

2010
146

2009
96.1

2008
27.58

2007

2006

21.19

36.95

2005
24.65

Debtors turnover Ratios


250
200
150

Debtors turnover Ratios

100
50
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

Debtors turnover Ratio in Day


This means that debtors collection period, is the average amount of days it takes, for the business to receive the money it
is owed from its customers. The sooner debtors pay the business the better, so a short debtors collection period is good. If

debtors pay quickly, it helps cashflow and reduces the risk of customers not paying the money they owe. The calculation
for debtors collection period is as follows:
Debtors Collection Period

Debtors (amount of money owed)


Sales Turnover

365

It's inefficiency or activity ratio that measures how many times a business can turn its accounts receivable into cash
during a period. In other words, the accounts receivable turnover ratio measures how many times a business can collect its
average accounts receivable during the year.
Ratio

2014

DTR

2013

2012

2011

2010

2009

2008

2007

2006

2005

Day
s

11

13

17

10

15

Debtors turnover Ratio in Day


20
15

Debtors turnover Ratio in Day

10
5
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

While debtor turnover days improved in comparison with last year and were consistent with the historic average of
3 days over the past 6 years

Creditors turnover in times


A short-term liquidity measure used to quantify the rate at which a company pays off its suppliers. Accounts payable
turnover ratio is calculated by taking the total purchases made from suppliers and dividing it by the average accounts
payable amount during the same period.

Ratio

2014

CTR

2013

2012

2011

2010

2009

2008

2007

2006

2005

Time
s

124

144

61

33

60

55

49.13

50.58

27.32

19.44

Number of days in payables stood at 124 times due to non-payment of GIDC under various Court
decisions.

Creditors turnover Ratio


160
140
120
100

Creditors turnover Ratio

80
60
40
20
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

Creditors turnover in Days


Creditor days estimate the average time it takes a business to settle its debts with trade suppliers. The ratio is a useful
indicator when it comes to assessing the liquidity position of a business.
Ratio
CTR

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

Day
s

11

13

19

Creditors turnover in days remains mostly consistent.

Creditors turnover in Days


20
18
16
14
12
10
8
6
4
2
0

Creditors turnover in Days

2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

Fixed Assets Turnover Ratios


The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments specifically property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the
company has been more effective in using the investment in fixed assets to generate revenues.

Ratio
FATR

2014
4.04

2013
4.04

2012
4.15

2011
3.24

2010
2.82

2009
2.58

2008
2.4

2007
2.74

2006
3.12

2005
2.77

Fixed Asset Turn over Ratio


5
4
3
2
1
0

Fixed Asset Turn over Ratio

2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

A low ratio indicates that a business:

Is overinvested in fixed assets

Needs to issue new products to revive its sales

Has made a large investment in fixed assets, with a time delay before the new assets start generating revenues

Has invested in areas that do not increase the capacity of the bottleneck operation, resulting in no additional
throughput

Earnings per Share


This is the amount of money each share of stock would receive if all of the profits were distributed to the outstanding
shares at the end of the year.
Earnings per share =Net profit Preferred Dividend/Outstanding share capital
Rati
2014
2013
2012
2011
2010
o
EPS
Rs
14.28
15.83
16.4
17.68
8.67
Earnings per share are approximately consistent in the last 3 years.

2009

2008

2007

2006

2005

6.94

5.18

3.62

3.46

3.41

Earnings Per Share


20
15

Earnings Per Share

10
5
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

As a result of decline in profits, the Companys earnings per share was recorded at Rs. 14.28 per share. Price to
earnings ratio however improved by 1.13 times as compared to 2013 as the market price of Companys share rose
from Rs. 111.96 at the close of 2013 to Rs. 117.11 for the year ended December 31, 2014.
Dividend yield Ratio
Dividend yield is the ratio of dividend per share to current share price. It is a measure of what percentage an investor is
earning in the form of dividends.
Dividend Yield = Dividend per Share/Current Share Price
Rati
o
DYR

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

11.99

13.77

12.29

16.51

14.24

14.93

13.57

9.43

8.07

11.39

Dividend yeild Ratio


20
15
10
5
0

Dividend yeild Ratio

2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

Comments:
It gives a handsome amount of dividend to shareholder.

Market value per share


Rati
o
MVS

Rs

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

117.11

111.96

117.14

149.54

125.86

102.93

58.73

118.75

105.55

137

Market Value per Share


150
Market Value per Share

100
50
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

Cash Dividend per share


The sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is the total dividends paid out
over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding
ordinary shares issued.

Ratio
CDP
S

Rs

2014
13.65

2013
15.35

2012
15.5

2011
20

2010
13

2009
13.15

2008
13.75

2007
11

2006
10

2005
12

Cash dividedn per share


20
15

Cash dividedn per share

10
5
0
2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

Bonus Share
A bonus share is a free share of stock given to current shareholders in a company, based upon the number of shares that
the shareholder already owns While the issue of bonus shares increases the total number ofshares issued and owned, it
does not change the value of the company.
Rati
o
BS

2014

2013

2012

2011

2010

2009

2008

2007

2006

50

25

10

40

2005
-

Capital Structure Ratios

Debt to Equity Ratio


The debt-to-equity ratio shows the proportion of equity and debt a firm is using to finance its assets, and the ability for
shareholder equity to fulfill obligations to creditors in the event of a business decline
Debt-to-equity ratio = total liabilities / total shareholders' equity
Rati
o
DER

2014

2013

2012

4/9

2/3

3/5

2011

2010

2009

2008

2007

2006

1/3

3/7

2/5

2005
1/3

A low debt-to-equity ratio indicates lower risk, since debt holders have fewer claims on the company's assets. A higher
debt-to-equity ratio, on the other hand, shows that a company has been aggressive in financing its growth with debt, and
there may be a greater potential for financial distress if earnings do not exceed the cost of borrowed funds.

INTEREST COVERAGE RATIO


A ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio is
calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest
expenses of the same period:

Ratio

2014

EBIT

31.91

2013
39.91

2012
32.08

2011
43.2

2010
16

2009
14.82

2008

2007

15.44

12.1

2006
14.94

2005
23.13

Interest coverage ratio


60
Interest coverage ratio

40
20
0
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

Comments:

Financial leverage ratio of 0.62 times for2014 is consistent with the average for the past 6 years. Debt to equity
ratio improved to 9:91 indicating the lowest amount of long-term debt in the last 6 years. Companys interest cover
ratio doubled to 32 times in comparison with 15 times in 2009 as result of lower finance cost to profitability ratio .

Conclusion
So,in the light of all the details given above about the financial analysis of FFC i.e Debt to equity, Liquidity and
profitability of FFC, we come to know that FFC has performed well even in shortage of Gas supply in the country. It is
consistently growing and paying higher rate of return to investor.