M a q b o o l T e x t i l e M i l l s L i m i t e d

Ratio Analysis of Maqbool Textile

A) LIQUIDITY RATIOS
1). Current Ratio = Current Assets
Current Liabilities

IN 2001
Current Ratio = 116271400
127319089

= 0.91

In 2002
Current Ratio = 149749085
156352805

= 0.95

COMMENTS: In 2002 the current ratio is 0.95, which is by no mean

acceptable. Although the value is better in 2002 as compared to 2001, but
still its is very low. The main reason is the Piling up of trade debtors, as the
amount is quite high, also the company’s export are decreasing by the time.

2). Quick Ratio = Current Assets – Inventories

Current Liabilities

IN 2001
Quick Ratio = 116271400 - 43678000
127319089

= 0.57: 1

IN 2002
Quick Ratio = 149749085 - 25816000
156352805

= 0.79 : 1

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 M a q b o o l T e x t i l e M i l l s L i m i t e d

COMMENTS: Quick ratio represents the assets, which can be disposed off
more quickly. The values shows some betterment signs in 2002 as compared to
2002 but still it is less than 1 and not fully acceptable. The main reason of
improvement is the better consumption of inventory in 2002 as compared to 2001.

3). Net Working Capital = Current Assets – Current Liabilities

IN 2001
Net Working Capital = 116271400 - 127319089

= (11047689)

IN 2002
Net Working Capital = 149749085 - 156352805

= (6603720)

COMMENTS: The negative values shows that the condition of Maqbool Textile
in 2002 remains unfavorable as in 2001.

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B) Activity Ratios
1). Days Receivable Ratios = Accounts Receivable *360
Sales

IN 2001
Days Receivable Ratio = 23139446 * 360
786188085

= 10.5 days

IN 2002
Days Receivable Ratio = 56610924 * 360
718763607

= 28.3 days

COMMENTS: In 2001 days receivable 10.5 days it means that Accounts

Receivable are converted into cash in such days it is much better because as the
days receivables increases the chances of bad debts increases. In 2002 days
receivable increases to 28.3 days, which is not much better for the company.

2). Inventory Days = Inventory * 360

CGS

IN 2001
Inventory Days = 43678000 * 360
708660640

= 22.1 days

IN 2002
Inventory Days = 25816000 * 360
658592785

= 14.1 days

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 M a q b o o l T e x t i l e M i l l s L i m i t e d

COMMENTS: In 2001 the inventory days was 22.1 days, it means that inventory
remain blocked for 22.1 days. In 2002 the inventory days reduced to 14 days,
which is favorable for the company.

3). Inventory Turnover ratio = CGS

Inventory

IN 2001
Inventory Turnover Ratio = 708660640
43678000

= 16.22 times

IN 2002
Inventory Turnover Ratio = 658592785
25816000

= 25.5 times

COMMENTS: In 2001 inventory 16.22 times it means that inventory converted

into sale for such time in 2002 inventory is 25.22 times which is more than 2001 it
means that inventory is not kept for a longer period.

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 M a q b o o l T e x t i l e M i l l s L i m i t e d

C) Profitability Ratios

1). Gross Profit Ratio = Gross Profit *100

Sales

IN 2001
Gross Profit Ratio = 77527445 * 100
786188085

= 9.8 %

IN 2002
Gross Profit Ratio = 60170822 *100
718763607

= 8.37 %

COMMENTS: During 2001 company has G.P ratio of 9.8 % and has G.P ratio
of 8.37% in 2002. Which shows decreasing trend, which is not encouraging, sign.
The main reason are the low G.P is the increase in expenses like Workers Welfare
Fund, Miscellaneous Expenses and also due to the decrease in the company’s
export.

2). Return On Equity = Net Profit Or Loss * 100

Equity

IN 2001
Return On Equity = 17893236 * 100
154104016

=11.6 %

IN 2002
Return On Equity = 7850671 * 100
155654687

=5.04 %

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COMMENTS: In 2001 return on equity was 11.6% and in 2002 it shows 5.04%.
Which shows declining trend. Which is normally against the interest of the
shareholders.

3). Net Profit Ratio = Net Profit * 100

Sales

IN 2001

Net Profit Ratio = 17893236 * 100

786188085

=2.27 %

IN 2002
Net Profit Ratio = 7850671 * 100
718763607

= 1.09 %

COMMENTS: This ratio is used to measure overall profitability and hence it is

very useful for proprietors. Though in 2002 net profit ratio declining trend but it is
not too much alarming for the company.

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D) Leverage And Long Term Solvency Ratios

1) Debt Equity Ratio = Long Term Loan

Fixed Assets

IN 2001
Debt Equity Ratio = 5625000
178021705

= 0.03

IN 2002
Debt Equity Ratio = 0
164569103

= 0
COMMENTS: As compared to 2001 the year 2002 has Null Debt Equity Ratio,
on one side it is beneficial for the company because the company has no long-term
debts, but on the other it could be fatal because the company is using its own
resources, which is more expensive.

2) Fixed Assets To Net Worth = Fixed Assets

Share Holder Equity

IN 2001
Fixed Assets To Net Worth = 178021705
154104016

= 1.15

IN 2002
Debt Equity Ratio = 164569103
155654687

= 1.05

COMMENTS: There is not much difference between 2001 and 2002 in Fixed
Assets To Net Worth.

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3) Fixed Assets To Long Term Funds = Fixed Assets

Equity + LTD

IN2001
Fixed Assets To Long Term Funds = 178021705
154104016 + 5625000

= 1.11

IN 2002
Fixed Assets To Long Term Funds = 164569103
155654687 + 0

= 1.05

COMMENTS: There is not much difference between 2001 and 2002 in Fixed
Assets To Net Worth.

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