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ACKNOWLEDGEMENT

All praises to Almighty Allah alone, the Most merciful and the most kind and His Holy prophet
Muhammad (Peace be Upon Him) the most perfect and praised one among and of ever
born on the surface of earth, who is forever touch of guidance and knowledge for the
humanity. Completion of anything requires supports from various sources. I am very much
fortunate to get the sincere guidance and supervision from a number of persons.
The work presented in this manuscript was accomplished under the guidance, generous
assistance, constructive criticism and enlightened supervision of respected Mr. Taimour
Hussain. His efforts towards the inculcation of spirit of constant work and the maintenance of
professional integrity besides other invaluable words of advice will always serve as beacon of
light throughout the course.

I take this humblest opportunity to my deepest sense of

gratitude and thankfulness to him. This internship report is not the result of individual effort.
It is a result of wonderful team-work.

Regards,
Hafiz Muhammad Adnan Akhtar
BBA(HONS)
The Islamia University Bahawalpur

Table of Contents
Topic
Acknowledgement
Executive Summary

Page No.
1
3

The Organization
Introduction
History
Products & Operations
Marketing
Closing Paragraph
Financial Analysis
Horizontal Analysis
Vertical Analysis
Liquidity Analysis
Solvency Analysis
Activity Ratio
Profitability Ratios
Bankruptcy Analysis
Conclusion
Recommendations
References

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4
5
8
9
10
10-21
22-28
29-31
32-34
34-39
40-47
48-51
52
52
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Executive Summary
Pak-Arab fertilizers Ltd. Is the manufacturer of fertilizers and ancillary products, established
on November 12, 1973 with a paid-up capital of PRs. 743.061 millions. Pak-Arab Fertilizers
Limited was privatized on July 14, 2005 at a cost of Rs.14.125 billion. It was acquired by the
consortium of Fatima Group and Arif Habib Group. It is located at Khanewal Road, Multan.
Pak-Arab limited is producing Carbon Dioxide, Calcium Ammonium Nitrate (CAN) Nitro
Phosphate (NP) and Urea. The market share of Pak-Arab in urea Production is 6% and have
monopoly in the production of CAN and NP.
It have strong distribution network in Pakistan. It has divided major cities as distribution
regions named as Lahore, Faisalabad, Sahiwal, Multan, Bahawalpur Rahimyar khan, D.G khan,
sukkur and Hyderabad where 920 distribution centers are created with more than 2262
business associates.
In short Pak-Arab is one of the biggest fertilizer production company as a subsidiary company
of Fatima Fertilizers Company, contributing healthily in the economy of Pakistan.

The

financial statements of the Pak- Arab Fertilizers limited shows a significant losses due to less
sales during last two years. Which are effected by the less production due to natural gas
crises

Conclusion and Recommendations are an Integral part of this report.

Orientation

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Introduction

Pak-Arab fertilizers Ltd. are the manufacturer of fertilizers and ancillary products, with a
focus on to be preferred fertilizer company for farmers, business associates and suppliers
through quality and services with safety, quality and contribution to national economic growth
and development.

Brief background & history


Pak-Arab Fertilizers Limited was established as a result of protocol concluded and signed on
November 15, 1972 by the Government of Pakistan to further strengthen and develop
fraternal ties between Islamic Republic of Pakistan and State of Abu Dhabi.
A Memorandum of Understanding was concluded between Pakistan Industrial Development
Corporation (PIDC) and Abu Dhabi National Oil Company Limited (ADNOC) on March 7, 1973. A
participation agreement emerged on November 1, 1973 to establish a joint venture for the
expansion and modernization of the old Natural Gas Fertilizer Factory (NGFF) at Multan.
The Company was incorporated on November 12, 1973. Subsequently, PIDC assigned 52% of its
shares to National Fertilizer Corporation (NFC) of Pakistan and ADNOC assigned 48% of its
shares to International Petroleum Investment Company, with a paid-up capital of PRs. 743.061
million.
Under the privatization policy of Government of Pakistan, Pak-Arab Fertilizers Limited was
privatized on July 14, 2005 at a cost of Rs.14.125 billion. It was acquired by the consortium of
Fatima Group and Arif Habib Group. Under the new management, Pak-Arab Fertilizers Limited
has undergone extensive modernization and new improved processes have been introduced to
maximize the output while minimizing the negative impacts on the environment. For this a
Clean Development Mechanism (CDM) plant was installed, which is the first project of its kind
in Pakistan. Basic aim of this project is the abatement of N2O and NOX emissions from the
stack gases of Nitric Acid plant. The reduction of greenhouse effect of these gases shows the
new managements commitment towards a cleaner environment.

Location
Pak-Arab Fertilizers Limited is located at Khanewal Road, Multan. The site area comprises 302
acres, which includes area for the factory and the housing colony with all amenities including
medical center, school, management and staff clubs for recreation of employees and their
families, etc.

Products & Operations


Pak-Arab Fertilizers Limited has been manufacturing and marketing "Compound Fertilizers" in
Pakistan for the last 38 years and offers products that are safe, consistent in quality and are
environment friendly. Working towards providing "balanced nutrition" to the crops, the
Company provides fertilizers for all crops and for the correct stage of growth. It also offers a
wide range of other products that mostly stem from upgraded gas and chemicals coming out
of the fertilizer production plants. As a leading fertilizer manufacturer, Pakarab Fertilizers
Limited has a strong production base for Carbon Dioxide, Calcium Ammonium Nitrate (CAN)
Nitro Phosphate (NP) and Urea and has a monopoly in the production of CAN and NP.it have
following production plants
1.
2.
3.
4.
5.
6.
7.

Ammonia Plant
Nitric Acid Plant
Urea Plant
Nitro Phosphate Plant
Calcium Ammonium Nitrate (CAN) Plant
CO2 Plant
Co-Generation power project

1. Ammonia Plant
Based on Kellogg process, steam reforming of the natural gas, the plant commenced
production in November 1978. The plant had capacity of 910 MTPD, which was enhanced by
50 MTPD through addition of Purge Gas Recovery Unit in April, 1986.
The plant is designed to operate 330-days per annum (initially 320-days/annum prior to
capacity increase). Present energy consumption at the plant is 9.6 G.Cal /MT of Ammonia
(excluding non-productive gas), which was 9.464 G.Cal /MT of Ammonia during guarantee
period.
2. Nitric Acid Plant

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There are two units (three lines) of Nitric Acid production. The old line has a capacity of 180
MTPD of 60% Nitric Acid strength. This line commenced production in 1963. Other two lines
have a capacity of 600 MTPD of 60% Nitric Acid. These two lines commenced production in
December, 1978.
The old line was modified in 1986 when an additional Absorption Tower was added, which
resulted in increase of Nitric Acid concentration to 60% strength and reduced pollution level
i.e. NOx Emission from 4000-6000 mg/cubic meter to 800 mg/cubic meter. The plant is
operated as and when required.
The two new lines have on stream factor of 330 days (originally 320 days). The old line
consumes 0.310 MT Ammonia/ton Nitric Acid (100% basis) while the new lines consume 0.290
MT Ammonia/ton of Nitric Acid (100% basis). Thus old unit of Nitric Acid consumes higher
energy. Approximately 40% of total Ammonia produced is used to produce Nitric Acid.
3. Urea Plant
A new Urea unit of 280 MTPD capacity commenced production in April, 1986 based on Snam
Progetti design. Old Urea unit, Evaporation unit and Prilling Tower were retained.
The new plant has 330 operating days/annum. Urea unit is a trouble free unit. It has the
highest production efficiency. The highest production achieved was 387 MTPD against design
of 280 MTPD (38.2% higher). Last year a production capacity of 101,754 MT of Urea as
compared to design of 92,420 MT/annum and was 10.12% higher despite gas supply disruption
due to load shedding (+ 13,619 M. Tons).
4. Nitro Phosphate Plant
The plant was designed to produce 229.4 MTPD of P2O5 or 1,015 MTPD of Nitro Phosphate
(NP) having 22.6% P2O5 with 300 on stream days/annum. The plant could not produce NP
product at its rated capacity both in terms of designed quality as well as quantity at the time
of guarantees; Uhde was made to undertake modifications on the plant, which they
performed through addition of 2-lines of Crystallizers making total six lines. Similarly 2
centrifuges were added to 4 existing ones and additional refrigeration capacity was provided.
However, even after the modifications desired product quality could not be achieved. The

plant consumes much higher energy level as compared with design. In view of the fact that
plant could not produce 22.6% P2O5, the specs were revised to 20% P2O5 and 22% Nitrogen
(originally 22.6% each of Nitrogen and P2O5).
The process was based on license from Stemicarbon, Holland, while detailed Engineering was
made by Uhde, Germany.
5. Calcium Ammonium Nitrate (CAN) Plant
Designed capacity of this plant is 1,500 MT per day of Calcium Ammonium Nitrate having 26%
Nitrogen contents and 1-2 % Potassium Sulphate as additional nutrient to stabilize the prills &
fulfill the soil requirement. It is manufactured by mixing 75% molten Ammonium Nitrate and
25 % Calcium Carbonate in the mixing tank at 170 Celsius. Around 550 to 700 MT of Ammonium
Nitrate is produced per day directly by reacting Ammonia gas and 60% Nitric acid in the
Neutralization Reactor. 1,050 MT of Ammonium Nitrate is produced per day in the CN Section
by reacting Calcium Nitrate solution with Ammonia and Carbon dioxide gases in the CN
Reactors. 600 MT of Calcium Carbonate is also produced per day in the same CN Reactors.
Calcium Ammonium Nitrate is hygroscopic by nature and absorbs moisture from the
atmosphere therefore it can be used in the soil without sufficient water. It contains 13%
Nitrate Nitrogen which supplies nutrients immediately to the plants and rest 13% Ammonium
Nitrogen gives food slowly till ripe up of the crop. Process of the plant is designed by Hoescht
whereas detail engineering is done by UHDE Germany. This plant is in production since 1979.
6. CO2 Plant
The CO2 Recovery Plant is designed to recover the impure, low pressure CO2 gas emitting
from the Ammonia Plant as a by-product gas and to produce purified, high pressure liquid
CO2. The capacity of this plant is 192 MT per day at a pressure of 21 bar. The temperature of
the Liquid CO2 is -20 C.

The liquefaction of gases is a complicated process that uses various compressions and
expansions to achieve high pressures and very low temperature liquids. There are various

Extinguishers, Dry Ice and as Food Perseveres.

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applications of CO2 which range from the use in Beverages, Manufacturing of Urea, Fire

7. Co-Generation Power project

On 20th July, 2007 Pak-Arab Fertilizers Limited submitted a plan for Co-generation Power
Project. The objective of the project was:

To generate power & steam by Gas Turbines with upstream Heat Recovery Steam
Generators (HRSG) for supply to fertilizer complex using clean, renewable and sustainable
cogeneration technology.

Application of the energy efficient process of cogeneration of heat and power in


natural gas fired cogeneration plant.

To help achieving the objectives of combating climate change under UN-FCCC by


reducing significant amount of greenhouse has (Carbon dioxide) emissions.
Pak-Arab Fertilizers Limited hired the services of Fichtner GmbH & Co. KG, Germany as the
"Project Development Constants" and with a total project cost of $ 35 million, the project
started on 1st January 2008 and was completed in one year.
The cogeneration plant has an operational life of 25 years and the new gas turbine
cogeneration plants estimated emission reduction capacity is 107,746 Tons of CO2 eq/year.

Marketing
Pak-Arab Fertilizers Limited has extended its market geographically in all over the Pakistan
but its major focus is southern Punjab and western sind. It have strong distribution network in
Pakistan. It has divided major cities as distribution regions named as Lahore, Faisalabad,
Sahiwal, Multan, Bahawalpur Rahimyar khan, D.G khan, sukkur and Hyderabad where 920
distribution centers are created with more than 2262 business associates.

The Major Competitor of Pak-arab Fertilizers Limited are Fauji Fertilizers, Pak China
Fertilizer, Engro Chemical Lyallpur Chemicals & Fertilizer, Dawood Hercules, Pak- American
Fertilizer.
Major Fertilizers industries of Pakistan produced different kind of fertilizers with ranking of
Engro Pakistan 33% Urea Production share Fauji Fertilizers (Goth Machi) 38%Fauji Fertilizers
(Bin Qasim) 7%Engro Fatima Pak 6% Arab (Multan) 8%Agri Tech (Mianwali) 7% Dawood Hercules
(Skp) 6% Only FF produces DAP.

Achievements
Pak-Arab Fertilizers Limited is awarded by the ISO 22000:2005 Certification.

Closing paragarph
Pak-Arab fertilizers Ltd. Is the manufacturer of fertilizers and ancillary products, established
on November 12, 1973 with a paid-up capital of PRs. 743.061 millions. Pak-Arab Fertilizers
Limited was privatized on July 14, 2005 at a cost of Rs.14.125 billion. It was acquired by the
consortium of Fatima Group and Arif Habib Group. It is located at Khanewal Road, Multan.
Pak-Arab limited is producing Carbon Dioxide, Calcium Ammonium Nitrate (CAN) Nitro
Phosphate (NP) and Urea. The market share of Pak-Arab in urea Production is 6% and have
monopoly in the production of CAN and NP.
In short Pak-Arab is one of the biggest fertilizer production company as a subsidiary company
of Fatima Fertilizers Company, contributing healthily in the economy of Pakistan.

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Financial Analysis
The process of evaluating businesses, projects, budgets and other finance-related entities to
determine their suitability for investment. Typically, financial analysis is used to analyze
whether an entity is stable, solvent, liquid, or profitable enough to be invested in. When
looking at a specific company, the financial analyst will often focus on the income statement,
balance sheet, and cash flow statement. In addition, one key area of financial analysis
involves extrapolating the company's past performance into an estimate of the company's
future performance.
Financial Analysis can be divided into five categories:
1. Liquidity (Solvency) ratios
2. Financial Leverage (Debt) ratios
3. Asset Efficiency (Management or turnover) ratios
4. Profitability ratios
5. Market value ratios

Horizontal Analysis
Horizontal analysis (also known as trend analysis) is a financial statement analysis technique
that shows changes in the amounts of corresponding financial statement items over a period
of time. It is a useful tool to evaluate the trend situations.
The statements for two or more periods are used in horizontal analysis. The earliest period is
usually used as the base period and the items on the statements for all later periods are
compared with items on the statements of the base period.
Horizontal analysis can be performed in the following two different methods i.e. absolute
comparison or percentage comparison.
1. Absolute Comparison

One way of performing horizontal analysis is comparing the absolute currency amounts of
some items over the period of time. This method is helpful in identifying the items which are
changing the most.
2. Percentage Comparison
In the second method of horizontal analysis, percentage differences in certain items are
compared over a period of time. The absolute currency amounts are converted into the
percentages for the purpose of comparison. This method is useful when comparing
performance of two companies of different scale and size. We are performing percentage
Comparison Horizontal Analysis.

Issued, Subscirbed and Paid up Capital


Reserves
Share Deposit money
Revalution Reserve
Total Equity
Non-Current Liabilities
Long term Finance
Suppliers credit - secured
Liabilities against assets subject to finance lease
Payable against mining rights
Long term deposits
Deferred liabilities
Deferred taxation
Total Non-Current Liabilities
Current Liabilities
Current portion of long term liabilities
Finances under mark up arrangements - secured
Derivative financial instruments
Payable to Privatization Commission of Pakistan
Short term loan from related party - secured
Trade and other payables
Accrued finance cost
Dividend payable
Provision for taxation
Total Current Liabilities
Total Liabilities and owner Equity

Liabilities and onwers equity

Description
Non-Current Assets
Property, plant and equipment
Assets subject to finance lease
Intangibles
Goodwill
Investments - related party
Loan to subsidiary
Security deposits
Total Non-current Assets
Current Assets
Stores and spare parts
Stock-in-trade
Trade debts
Other receivables
Derivative financial instruments
Investments
Cash and bank balances
Total Current Assets
Total Assets

Balance Sheet

4,500
7,548
200
2,476
14,724
13,372
218
44
57
5,574
19,265
4,009
4,702
2,198
4,458
650
631
16,648
50,637

16,191
107
52
732
46
4,975
22,103
1,339
5,556
2,198
2,491
989
127
12,700
52,126

2,310
2,947
1,851
3,583
69
6,513
186
17,459
50,637

1,880
2,793
1,427
6,814
8
3,930
235
17,087
52,126

4,500
10,147
200
2,476
17,323

21,916
283
183
3,305
2,930
4,516
45
33,178

2010

21,285
148
206
3,305
7,882
2,196
17
35,039

2009

6,335
4,644
2,198
3,121
677
3,755
731
21,461
65,341

8,484
1,796
138
48
91
10,967
21,524

4,500
5,714
200
11,942
22,356

2,583
2,058
890
5,300
19
7,359
796
19,005
65,341

37,937
230
161
3,305
130
4,516
57
46,336

2011

4,878
5,814
2,198
3,225
366
1,078
17,559
54,636

4,559
1,488
50
46
115
10,923
17,181

4,500
3,432
11,964
19,896

3,023
1,734
571
6,042
1,084
994
13,448
54,636

37,290
121
149
3,305
262
61
41,188

2012

3,132
4,736
2,198
3,000
3,989
337
17,392
48,148

1,466
1,100
47
126
9,933
12,672

4,500
1,700
11,884
18,084

2,904
812
153
3,174
160
7,203
48,148

37,114
51
144
3,305
295
36
40,945

2013

100%
100%
100%
100%
100%
100%
100%
100%

100%
100%
100%
100%
100%
100%
100%

100%
100%
100%
100%
100%

100%
100%
100%
100%
100%
100%
100%
100%
100%

100%
100%
100%
100%
100%
100%
100%
100%

2009

299.40%
84.63%
100.00%
178.96%
65.72%
496.85%
131.09%
97.14%

82.59%
203.74%
6.01%
123.91%
112.04%
87.16%

100.00%
74.39%
100.00%
100.00%
85.00%

122.87%
105.51%
129.71%
52.58%
862.50%
165.73%
79.15%
102.18%
97.14%

102.96%
191.22%
88.83%
100.00%
37.17%
205.65%
264.71%
94.69%

2010

473.11%
83.59%
100.00%
125.29%
68.45%
100.00%
575.59%
168.98%
125.35%

52.40%
100.00%
128.97%
6.56%
197.83%
220.44%
97.38%

100.00%
56.31%
100.00%
482.31%
129.05%

137.39%
73.68%
62.37%
77.78%
237.50%
187.25%
338.72%
111.22%
125.35%

178.23%
155.41%
78.16%
100.00%
1.65%
205.65%
335.29%
132.24%

2011

364.30%
104.64%
100.00%
129.47%
37.01%
28.71%
138.26%
104.82%

28.16%
82.85%
46.73%
6.28%
250.00%
219.56%
77.73%

233.91%
85.24%
100.00%
100.00%
160.14%
34.07%
136.94%
92.37%

9.05%
61.25%
6.42%
273.91%
199.66%
57.33%

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154.47%
29.07%
10.72%
46.58%
68.09%
42.15%
92.37%

174.37%
34.46%
69.90%
100.00%
3.74%
211.76%
116.86%

2013

100.00%
Page100.00%
33.82%
16.75%
483.20%
479.97%
114.85%
104.39%

160.80%
62.08%
40.01%
88.67%
27.58%
422.98%
78.70%
104.82%

175.19%
81.76%
72.33%
100.00%
3.32%
358.82%
117.55%

2012

Balance Sheet
Assets
1. Non-Current assets
a. Property, plant and equipment
This account indicates the real assets of the company. The results of horizontal analysis shows
an increasing trend in the last five years. This shows that firm is spending more to create its
operating assets. Since the computed value shows a growth of 74% in the Assets during FY2013
as compared to base year.
b. Assets subject to finance lease
The calculated figures are showing that the financial lease assets are decreasing in the firm.
The highest value of assets can be seen during the YF 2010, after that it tends to 34% during
the FY 2013 by decreasing up to 157%. This shows that the firm is avoiding reward
classification and taking risk to increase its profits.
c. Intangibles
Computer software and Mining Rights are amortized using the straight line method.
Calculations shows that Pak-Arab Fertilizers limited purchased it intangibles assets during
FY2009 which are amortized and its value is decreasing gradually year by year.
d. Goodwill
The value of a companys brand name, solid customer base, good customer relations, good
employee relations and any patents or proprietary technology represent goodwill. The
computed values are indicating that there is no change in the in the good will during last five
years. It remains constant during the periods.
f. Investments - related party
Calculations show that the Pak-Arab fertilizers Limited Companys investments to related
parties is following decreasing trend over the year. The highest value can be seen during FY
2009. Thereafter it decreases significantly.
g. Loan to subsidiary
The calculations show that the loan to subsidiary companies following increasing trend from
base year to FY 2011 as the highest value can be seen. There after the account was closed
after getting back the loans.

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h. Security deposits

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The security deposits are showing increasing trend from base year to FY 2012 as the highest
value can be seen during this year. There after there is a decrease in the value during FY
2013.
Total Non-current Assets
The analysis shows that the total non-current assets are showing ups and down trends over
the previous five years. Highest value can be seen during the FY 2011. There after the value is
decreasing significantly till FY 2013.
2. Current Assets
a. Stores and spare parts
The analysis shows that the Stores and spare parts are showing ups and down trends over the
previous five years. Highest value can be seen during the FY 2012. There after the value is
decreasing till FY 2013. This means that company is now losing its Stores and spare parts.
b. Stock-in-trade
The analysis show that the Stock in trade are showing upward trends till FY 2010 as the
highest value can be seen during this year. There after the value is decreasing significantly till
FY 2013. This means that company Prefers to have low stock in trade.
c. Trade debts
The calculated figures are showing that the trade debts were following increasing trend
during the FY 2010. The highest value of assets can be seen during the FY 2010, after that it
tends to decrease from FY2011to FY 2013 by decreasing up to 119%. This shows that the firm
is avoiding sales on credit.
d. Other receivables
The calculated figures are showing that the companys other receivable were following
decreasing trend from the base year to FY 2011, after a slight rise during FY 2012 it tends to
decrease again during FY 2013.This shows that the firm is focused to get back is receivables.
e. Derivative financial instruments
The analysis showed that the Derivative financial instruments showed upward trend till FY
2010 as the highest value can be seen during this year. Than the value was significantly

decreased during FY 2011. Thereafter this account was terminated. This means that company
Preferred to have cash for operations.
f. Investments
The analysis showed that the investment account showed upward trend till FY 2011 as the
highest value can be seen during this year. Than the value was significantly decreased during
FY 2012. Thereafter this account was terminated. This means that company Preferred to have
cash for operations.
g. Cash and bank balances
The analysis showed that the investment account showed upward trend till FY 2012 as the
highest value can be seen during this year. Than the value is significantly decreasing during FY
2013. This shows that the company is facing loss.
Total Current Assets
The calculated figures are showing that the total current assets are following increasing trend
from the base year to FY 2011 as the highest figure can be seen during this year. Thereafter it
is following decreasing trend during FY 2012 to FY 2013. This shows that the current assets of
the company are decreasing and facing loss.

Liabilities and owners equity


1. Equity
a. Issued, Subscribed and Paid up Capital
The analysis show that the Issued, Subscribed and Paid up Capital following constant trend
without any ups and down during the last five years. It means that the company did not issued
any share after FY2009.
b. Reserves
The analysis show that the reserves are following decreasing trend during the last five years.
It means that the reserves are declining very fast.
c. Share Deposit money
The analysis show that the share deposit money account following constant trend without any
ups and down during the base year to FY 2012.thereafter the account is terminated.
d. Revaluation Reserve
The analysis show that the revaluation of reserves account is following constant trend without
any ups and down till FY 2010. There after it follows an increasing trend as the highest value

Total Equity

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the value of assets is increasing.

17

can be seen during the FY 2012, and a slight decrease in FY 2013 came again. It means that

The analysis show that the total equity account is following increasing trend till FY 2011.
There after it follows decreasing trend till FY 2013.

2. Non-Current Liabilities
a. Long term Finance
The analysis show that the Long term finance account is following decreasing trend over the
previous five years. The results show that the company is paying off its long term debt.
b. Suppliers credit secured
The analysis show that the Suppliers credit secured account was created during FY 2011 and
following decreasing trend over the previous three years. The results show that the company
is paying off its suppliers debt.
c. Liabilities against assets subject to finance lease
The analysis show that Liabilities against assets subject to finance lease account is following
increasing trend till FY 2010 as the highest value can be during this year. There after it
follows decreasing trend till FY 2012, and account is terminated during FY 2013.
d. Long term deposits
The analysis show that the long term deposit account is following decreasing trend over the
five previous years and decreased significantly.
e. Deferred liabilities
The analysis show that deferred Liabilities account is following increasing trend during the
last five years as the highest value can be during FY 2013.this shows that firm is preferring to
hold cash rather than paying off, as long as possible.
f. Deferred taxation
The analysis show that deferred Taxation account is following increasing trend till FY 2012 as
the highest value can be during this years. There after the value of is at decreasing trend over
till FY 2013. This shows that firm is preferring to hold cash rather than paying off taxation, as
long as possible.
Total Non-Current Liabilities

The analysis show that total noncurrent Liabilities account is following decreasing trend with
slightly ups and down during the last five years. This shows that firm is preferring to pay off
its long term liabilities.
3. Current Liabilities
a. Current portion of long term liabilities
The analysis show that Current portion of long term liabilities account is following increasing
trend till FY 2011.there after it show decreasing trend. This shows that firm is paying off its
long term liabilities.
b. Trade and other payables
The analysis show that trade and other payables account is following increasing trend till FY
2010 as the highest value can be seen this year. There after it show decreasing trend till
FY2012 and increase in FY 2014. This shows that firm is paying less or more to its suppliers.
c. Dividend payable
The analysis show that the dividend payable account was created during FY 2011 and
following decreasing trend for next year. There after the account is terminated. This shows
that firm had paid dividend only two years.

Total Current Liabilities


Total current liabilities are at increasing trend till FY 2011. Thereafter following decreasing
trend.
Total Liabilities and owner Equity
Total liabilities and owner equity accounts following mixed trend. It followed increasing trend
till 2012 as the highest value can be seen during this year. Thereafter the value is decreasing
too. Its means that the liabilities are decreasing which is good sign.

342

Othr Operating Income

(510)

741

(299)

(495)

8,342 8,943 10,665 2,929

EBITDA

(745)

(240) (1,825)

4,738 3,232 4,590

973

(896) (2,798)

(47)

(444)(1,464)
(1,721) 656

5,183 4,697 6,311

261

(382)

(849) (2,798)

1,528

(218)

Profit After Tax

Taxation

Profit before Tax

Share gain/(loss) of associated


(25)company
(39)
(18)

Re- measurement gain/(loss)


2,866 (121)

2,341 4,856 5,588

1,409 1,855

(244) (386)

Other operating Expenses

Operating Profit

(829)

(969) (1,165)(888)

286

(3,159)
(3,589)
(3,472)(2,610)
(1,579)

(898) (994)

Selling & Distribution cost

Financial cost

(610) (780)

Administrative Expenses

1,915

6,910 9,197 9,513

2013

Gross profit

2012

(9,796)
(9,051)
(7,188)(6,221)
(7,143)

2011

Cost of Goods sold

2010

16,706
18,24816,701 8,136 7,428

2009

Sale

Description

Income Statement

64%

4%

73%

44%

157%

50%

19

55%

-2%

-5%
107%
128% 35%
100%

100%68% 97%

-9%

-39%

100%
330%
388%-148%-219%

100%91% 122% -17% -54%

100%
156%72%

100%-4% 26%

100%
207%
239% -36% -120%

100%
412%
542% 447% 76%

100%
158%
209% 89%

Page

33%
100%
114%
110% 83%

100%
111%92%

100%
128%
159% 191% 146%

100%
133%
138% 28%

100%92% 73%

100%
109%
100% 49%

2009
20102011 2012 2013

Income Statement
1. Sales
The sales account is following increasing trend during the FY 2010 as the highest value can be
during this year 109%. After that it follow decreasing trend till FY 2013.The results shows that
the sales of the company decreasing significantly. this is a bad sign for company.
2. Cost of Goods sold
Cost of goods sales account is following decreasing trend till FY 2012. After that there is a
slight rise in value during FY 2013. This shows that the cost of good sales is decreasing.
3. Gross profit
The gross profit account is following over all decreasing trend it is increasing till 2011. After
that it is decreasing significantly till 2013 as the value is just 4%. The result shows that the
cost of goods sales is increasing which cause the less in gross profit.
4. Administrative Expenses
Administrative Expenses is following overall increasing trend as the highest value can be seen
during the FY2012. Then it is following decreasing trend. This is not a good sign for the firm.
5. Selling & Distribution cost
Selling and admin cost account is following an overall decreasing trend it is increasing during
2010 there after it is decreasing.
6. Operating Profit
Operating profit account shows an overall decreasing trend. It is increasing till FY 2011. There
after it is decreasing till FY 2013 as it is showing negative. This shows that the company is
facing loss due to less sales.
7. Taxation
Taxation account is showing an overall decrease in the values. It is increasing till FY 2011 as
the highest value can be seen during this year. Thereafter the value is decreasing. This show
the company is getting tax return benefit as the company is facing losses.
8. Profit After Tax
Profit after tax of Net Profit account is showing an overall decrease in the values. It is
decreasing till FY 2010 and after one year there is an increase as the highest value can be
seen during FY 2012. Thereafter the value is decreasing and showing losses. This show the
company is facing losses.

(36,713)

(379,235)

(20,000)

Investments made

Short term loan to related party

Preference dividend received from related party

(2,000)
-

(94,454)

(84,000)

3,000,000

(50,326)

(21,000)

(3,847)

(4,820)

(4,576)

100%

100%

100%

100%

243,768

100%

100%

100%

100%

100%

Cash and cash equivalents at the end of the year(in


-5,321
millions)
(4,517)

(972,645)

(5,664,511) (1,863,940)

(88,092)

(200,000)

(3,551,419) (1,667,614)

2,000,000

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

Cash and cash equivalents at the end of the (5,320,705)


year
(4,516,853) (3,847,483) (4,820,128) (4,576,360)

669,370

2,789,963

28,252

1,337,214

1,595,798

8,768

(1,408)

75,006

965

(22,493)

(232,139)

(682,255)

(67,930)

(233,540)

(3,825,000) (3,215,000)

5,870,438

26,997

824

27,229

5,815,565

(1,300,000)

1,800,000

(128,096)

64,648

(11,369)

(9,266)

(416,094)

(1,178,572)

(54,076)

(257,656)

100%

2009

100%

803,852

(316,418) (2,643,037)

(89,849)

(52,500)

(943,270) (1,277,419)

1,437,836

1,227,742

2013

(2,921,456) (1,608,527)

2,054,616

2012

Cash and cash equivalents at the beginning of


(5,146,498)
the year (5,320,705) (4,516,853) (3,847,483) (4,820,128)

Net increase/(decrease) in cash and cash equivalents


(174,207)

3,466,799

(52,899)

Payment of finance lease liabilities

(40,000)

Payment of liability against mining rights

Share deposit money refunded

(710,137)

15,622

(103,133)

26,581

(12,018)

(637,189)

4,022,544

(41,345)

(581,191)

(297,000) (2,625,000)

1,524,198 1,066,201

Repayment of long term loans

Net cash outflow from financing activities

12,593

386,602

(10,352,464)(2,988,908)

Proceeds from short term loan acquired from related


2,037,500
party

Proceeds from long term loans acquired

Repayment of redeemable capital

Cash flows from financing activities

Net cash inflow from investing activities

7,715

Interest received on receivable from related party

Profit on bank deposits received

150,000

(2,196,320)(2,319,245)

Sale proceeds of investment disposed

Loans repaid by related party

Investments redeemed

22,255

(6,635,883)

(27,472)

(9,438)

(1,521,256)(1,193,641)

6,711,458 4,109,178

8,318

(27,816)

(403,835)

Sale proceeds of property, plant and equipment disposed


2,718

Security deposits

Purchase of intangible assets

Purchase of property, plant and equipment

Cash flows from investing activities

Net cash outflow from operating activities

Long term deposit received

Retirement benefits

Taxes paid

(2,983,608)(3,929,090) (3,445,470)

8,090,550

2011

Finance cost paid

2010

10,118,399 8,454,216

2009

Cash genrted form operations

Cash from Operating activities

Description

Statement of cashflow

7%

202%

0%

2%

978%

127%

42%

60%

149%

144%

115%

80%

2011

-57%

350%

100%

7%

85%

85%

103%

-461%

-9%

170%

0%

100%

100%

0%

70%

72%

72%

88%

-384%

-76%

179%

0%

160%

135%

0%

94%

91%

91%

75%

558%

-163%

167%

500%

0%

377%

0%

131%

413%

21

6%

0%

2760%

-10%

243%

15%

-10%

244%

58%

54%

12%

2013

86%

86%

94%

-140%

-54%

95%

0%

40%

177%

147%

0%

160750%

-27%

366%

162283%

Page
-265%

100%

100%

2%

2379%

120%

100%

27%

-18%

194%

64%

98%

20%

2012

14850% 131250% 191250%

29%

163%

100%

106%

100%

0%

819%

291%

78%

61%

132%

94%

132%

84%

2010

Statement of cash flow


1.

Net cash inflow from operating activities

Net cash inflow from operating activities account is showing an overall decrease in the values.
It is decreasing and positive till FY 2011 and after one year there is decreased to negative
value as it can be seen during FY 2012. Thereafter the value is increasing slightly but showing
negative value. This show the company is facing losses.

1.

Net cash inflow from investing activities

Net cash inflow from investing activities account is showing an overall decrease in the values.
It is decreasing and positive till FY 2011 and after one year there is decreased to negative
value as it can be seen during FY 2012. Thereafter the value is increasing slightly but showing
negative value. This show the company is facing losses.

2.

Net cash inflow from financing activities

Net cash inflow from financing activities account is showing an overall decrease in the values.
It is decreasing till FY 2012 and after one year there is an increased in value as it can be seen
during FY 2013.The value is increasing significantly but showing negative value. This show the
company is facing losses.

3.

Cash and cash equivalents at the end of the year

Cash and cash equivalents at the end of the year account is showing an overall decrease in
the values. It is decreasing till FY 2011 and after one year there is an increased in value as it
can be seen during FY 2012.The value is decreasing again in FY 2013 as can be seen in table.
This show the company is facing losses.

Issued, Subscirbed and Paid up Capital


Reserves
Share Deposit money
Revalution Reserve
Total Equity
Non-Current Liabilities
Long term Finance
Suppliers credit - secured
Liabilities against assets subject to finance lease
Payable against mining rights
Long term deposits
Deferred liabilities
Deferred taxation
Total Non-Current Liabilities
Current Liabilities
Current portion of long term liabilities
Finances under mark up arrangements - secured
Derivative financial instruments
Payable to Privatization Commission of Pakistan
Short term loan from related party - secured
Trade and other payables
Accrued finance cost
Dividend payable
Provision for taxation
Total Current Liabilities
Total Liabilities and owner Equity

Liabilities and onwers equity

Non-Current Assets
Property, plant and equipment
Assets subject to finance lease
Intangibles
Goodwill
Investments - related party
Loan to subsidiary
Security deposits
Total Non-current Assets
Current Assets
Stores and spare parts
Stock-in-trade
Trade debts
Other receivables
Derivative financial instruments
Investments
Cash and bank balances
Total Current Assets
Total Assets

Assets

Description

Balance Sheet

2,310
2,947
1,851
3,583
69
6,513
186
17,459
50,637

1,880
2,793
1,427
6,814

4,500
7,548
200
2,476
14,724
13,372
218
44
57
5,574
19,265
4,009
4,702
2,198
4,458
650
631
16,648
50,637

4,500
10,147
200
2,476
17,323
16,191
107
52
732
46
4,975
22,103
1,339
5,556
2,198
2,491
989
127
12,700
52,126

8
3,930
235
17,087
52,126

21,916
283
183
3,305
2,930
4,516
45
33,178

2010

21,285
148
206
3,305
7,882
2,196
17
35,039

2009

6,335
4,644
2,198
3,121
677
3,755
731
21,461
65,341

8,484
1,796
138
48
91
10,967
21,524

4,500
5,714
200
11,942
22,356

2,583
2,058
890
5,300
19
7,359
796
19,005
65,341

37,937
230
161
3,305
130
4,516
57
46,336

2011

4,878
5,814
2,198
3,225
366
1,078
17,559
54,636

4,559
1,488
50
46
115
10,923
17,181

4,500
3,432
11,964
19,896

3,023
1,734
571
6,042
1,084
994
13,448
54,636

37,290
121
149
3,305
262
61
41,188

2012

3,132
4,736
2,198
3,000
3,989
337
17,392
48,148

1,466
1,100
47
126
9,933
12,672

4,500
1,700
11,884
18,084

2,904
812
153
3,174
160
7,203
48,148

37,114
51
144
3,305
295
36
40,945

2013

2.57%
10.66%
0.00%
4.22%
0.00%
4.78%
1.90%
0.00%
0.24%
24.36%
100%

31.06%
0.00%
0.21%
0.10%
1.40%
0.09%
9.54%
42.40%

8.63%
19.47%
0.38%
4.75%
33.23%

3.61%
5.36%
2.74%
13.07%
0.02%
7.54%
0.45%
32.78%
100%

40.83%
0.28%
0.40%
6.34%
15.12%
4.21%
0.03%
67.22%

2009

7.92%
9.29%
0.00%
4.34%
0.00%
8.80%
1.28%
0.00%
1.25%
32.88%
100%

26.41%
0.00%
0.43%
0.00%
0.09%
0.11%
11.01%
38.05%

8.89%
14.91%
0.39%
4.89%
29.08%

4.56%
5.82%
3.66%
7.08%
0.14%
12.86%
0.37%
34.48%
100%

43.28%
0.56%
0.36%
6.53%
5.79%
8.92%
0.09%
65.52%

2010

9.70%
7.11%
0.00%
3.36%
0.00%
4.78%
1.04%
5.75%
1.12%
32.84%
100%

12.98%
2.75%
0.21%
0.00%
0.07%
0.14%
16.78%
32.94%

6.89%
8.74%
0.31%
18.28%
34.21%

3.95%
3.15%
1.36%
8.11%
0.03%
11.26%
1.22%
29.09%
100%

58.06%
0.35%
0.25%
5.06%
0.20%
6.91%
0.09%
70.91%

2011

8.93%
10.64%
0.00%
4.02%
0.00%
5.90%
0.67%
1.97%
0.00%
32.14%
100%

8.34%
2.72%
0.09%
0.00%
0.08%
0.21%
19.99%
31.45%

8.24%
6.28%
0.00%
21.90%
36.42%

5.53%
3.17%
1.05%
11.06%
0.00%
1.98%
1.82%
24.61%
100%

68.25%
0.22%
0.27%
6.05%
0.48%
0.00%
0.11%
75.39%

2012

23

6.50%
9.84%
0.00%
4.57%
6.23%
8.28%
0.70%
0.00%
0.00%
36.12%
100%

3.04%
2.28%
0.00%
0.00%
0.10%
0.26%
20.63%
26.32%

9.35%
3.53%
0.00%
24.68%
37.56%

Page

6.03%
1.69%
0.32%
6.59%
0.00%
0.00%
0.33%
14.96%
100%

77.08%
0.11%
0.30%
6.86%
0.61%
0.00%
0.07%
85.04%

2013

Verticle Analysis
Balance Sheet
1. Assets
a. Total Non-current Assets
The analysis show that total noncurrent Assets account was 67.22% of total assets during the
FY 2009 and 71% during FY 2011. Thereafter it is increasing over the years and noticed as 85%
during the FY 2013. This shows that the company is focused on increasing its long term assets
which is good sign for the company and cause to increase its operations.
b. Current Assets
The analysis show that total current Assets account was 32.78% during the FY 2009 and 29%
during FY 2011 of total assets. Thereafter it is decreasing over the years and noticed as 14%
during the FY 2013. This shows that the company is financing its long term assets through
short term liabilities and have less assets to finance its operations.

2. Liabilities and owners equity


a. Total Equity
The analysis show that total equity account was 33% during the FY 2009 and 34% during FY
2011 of total liabilities and owners equity. Thereafter it is increasing over the years and
noticed as 37% during the FY 2013. This shows that the equity is increasing and financial
health of the company is getting stronger than ever to finance its operations.
b. Total Non-Current Liabilities
The analysis show that total non-current liabilities account was 42% during the FY 2009 and
33% during FY 2011 of total liabilities and owners equity. Thereafter it is decreasing over the
years and noticed as 26% during the FY 2013. This shows that the long term liabilities are
decreasing and financial health of the company is getting stronger.
c. Total Current Liabilities
The analysis show that total current liabilities account was 424% during the FY 2009 and 33%
during FY 2011 of total liabilities and owners equity. Thereafter it is decreasing over the
years and noticed as 36% during the FY 2013. This shows that the short term liabilities are
increasing and financial health of the company is getting stronger than ever to finance its
operations.

(829)

(299)

741

4,697

6,311

4,738
8,342

EBITDA

(745)

(240) (1,825)

973

(896) (2,798)

(47)

8,943 10,665 2,929

3,232 4,590

261

(382)

(849) (2,798)

(444) (1,464)
(1,721) 656

Profit After Tax

Taxation

5,183

Share gain/(loss) of associated


(25)
(39)
company
(18)

Re- measurement gain/(loss)


2,866
(121)

2,341

4,856 5,588

(218)

Operating Profit

(510)

1,409 1,855 1,528

(386)

Othr Operating Income


342

Other operating Expenses


(244)

Profit before Tax

(495)

(969) (1,165) (888)

286

(3,159)
(3,589)
(3,472)
(2,610)
(1,579)

(994)

Selling & Distribution (898)


cost

Financial cost

(780)

Administrative Expenses
(610)

9,197 9,513 1,915

6,910

2013

Gross profit

2012

(9,796)
(9,051)
(7,188)
(6,221)
(7,143)

2011

Cost of Goods sold

2010

16,70618,24816,701 8,136 7,428

2009

Sale

Description

Income Statement

18%
49%

50%

-8%

26%

0%

-1%

27%

8%

-2%

-20%

-5%

-4%

50%

-50%

100%

2010

28%

-3%

31%

0%

17%

14%

2%

-1%

-19%

-5%

-4%

41%

-59%

100%

2009

2013

-4%

-14%

24%

25

-7%

-12%

4%

-96%

64%

27%

-10%

38%

0%

4%

33%

11%

-3%

36%

-3%

8%

-11%

-1%

-10%

19%

-3%

-10%

-25%

13%

-38%

-38%

4%

-5%

-21% -32%
Page-21%

-5%

-6%

57%

-43% -76%

100% 100% 100%

2011 2012

Income Statement
1. Cost of Goods sold
The analysis show that cost of goods sold account was 50% during the FY 2009 and 43% during
FY 2011 of total Sales. Thereafter it is increasing over the years and noticed as 96% during the
FY 2013. This shows that the cost of Goods sold is increasing and not a good sign for company
and cause loss.

2. Gross profit
The analysis show that gross Profit account was 41% during the FY 2009 and 57% during FY
2011 of total Sales. Thereafter it is decreasing over the years and noticed as 4% during the FY
2013. This shows that the cost of Goods sold is increasing and cause of less gross profit.

3. Administrative Expenses
The analysis show that administrative expenses account was 4% during the FY 2009 and 6%
during FY 2011 of total Sales. Thereafter it is increasing over the years and noticed as 12%
during the FY 2013. This shows that the expenses are increasing and cause of less profit.

4. Selling & Distribution cost


The analysis show that Selling & Distribution cost account was 5% during the FY 2009 to FY
2011 of total Sales. Thereafter it is increasing over the years and noticed as 7% during the FY
2013. This shows that the expenses are increasing and cause of less profit.
5. Operating Profit
The analysis show that the operating profit account was 14% during the FY 2009 and 33%
during FY 2011 of total Sales. Thereafter it is decreasing over the years and noticed as 38%
loss during the FY 2013. This shows that the firm is facing loss currently.
6. Taxation
The analysis show that the taxation account was 3% during the FY 2009 and 10% during FY
2011 of total Sales. Thereafter it is decreasing over the years and noticed as 13% tax return

Page

compensation.

27

during the FY 2013. This shows that the firm is facing loss currently and getting return as

7. Profit After Tax


The analysis show that the profit after tax account was 28% during the FY 2009 and 27%
during FY 2011 of total Sales. Thereafter it is decreasing over the years and noticed as 25%
loss during the FY 2013. This shows that the firm is facing loss currently.

2012

2013

Short term loan to related party

150,000

(20,000)

(9,266)

15,622

26,997

824

27,229

5,815,565

(1,300,000)

1,800,000

(103,133) (128,096)

64,648

(11,369)

28,252

1,337,214

1,595,798

8,768

(1,408)

75,006

965

(22,493)

3,000,000

(94,454)

(84,000)

(88,092)

(200,000)

(50,326)

(21,000)

-53%

-2%

Cash and cash equivalents at the end


(5,320,705)
of the year
(4,516,853)(3,847,483)(4,820,128)(4,576,360)

243,768

-51%

(972,645)

34%

-1%

0%

20%

Cash and cash equivalents at the beginning


(5,146,498)
of the
(5,320,705)
year (4,516,853)(3,847,483)(4,820,128)

669,370

(316,418) (2,643,037)(5,664,511)(1,863,940)

(89,849)

(52,500)

(943,270) (1,277,419)(3,551,419)(1,667,614)

Net increase/(decrease) in cash and cash


(174,207)
equivalents
803,852

Net cash outflow from financing activities


3,466,799

(52,899)

Payment of finance lease liabilities

(40,000)

Payment of liability against mining rights

Share deposit money refunded

Repayment of long term loans

Proceeds from short term loan acquired


2,037,500
from related party
-

15%

0%
-

(297,000) (2,625,000)(3,825,000)(3,215,000)

Proceeds from long term loans acquired


1,524,198 1,066,201 1,437,836 2,000,000

Repayment of redeemable capital

-102%

0%

0%

-22%

-66%

0%

0%
(2,000)

0%

Cash flows from financing activities

Net cash inflow from investing activities


(10,352,464)(2,988,908) (710,137) 5,870,438 2,789,963

12,593

7,715

Preference dividend received from related party


-

Profit on bank deposits received

386,602

Interest received on receivable from related -party

(2,196,320) (2,319,245)

Loans repaid by related party

Sale proceeds of investment disposed

(6,635,883)

Investments redeemed

Investments made

26,581

Sale proceeds of property, plant and equipment


2,718 disposed
22,255

(12,018)

(9,438)

(27,472)

Security deposits

Purchase of intangible assets

-53%

-63%

10%

-4%

-1%

-1%

-11%

13%

-4%

0%

-35%

0%

5%

-27%

2%

0%

0%

0%

-14%

0%

0%

-4%

0%

0%

0%

-4%

-15%

(67,930)

Cash flows from investing activities

(54,076)

Purchase of property, plant and equipment


(1,521,256) (1,193,641) (637,189) (416,094) (232,139)

(41,345)

(581,191) (257,656) (233,540)

-46%

100%

2010

49%

(36,713)

(379,235)

-29%

100%

2009

66%

8,318

(27,816)

(403,835)

Net cash outflow from operating activities


6,711,458 4,109,178 4,022,544 (1,178,572) (682,255)

Long term deposit received

Retirement benefits

Taxes paid

(2,983,608) (3,929,090)(3,445,470)(2,921,456)(1,608,527)

2011

10,118,399 8,454,216 8,090,550 2,054,616 1,227,742

2010

Finance cost paid

2009

Cash genrted form operations

Cash from Operating activities

Description

Statement of Cash Flow

-48%

-56%

8%

-33%

-1%

-1%

-16%

18%

-32%

0%

-9%

0%

-1%

0%

0%

-8%

0%

50%

-1%

-7%

-43%

100%

2011

-235%

-187%

-47%

-276%

-4%

-10%

-173%

97%

-186%

0%

286%

1%

0%

1%

283%

-63%

0%

88%

-6%

3%

-1%

0%

-20%

0%

-57%

-3%

-13%

-142%

100%

2012

-373%

-393%

20%

-152%

-4%

-2%

-136%

244%

0%

-262%

0%

227%

2%

109%

130%

1%

0%

6%

0%

-2%

-19%

0%

-56%

-6%

-19%

-131%

100%

2013

Net cash inflow from operating activities


Page

1.

29

Statement of cash flow

The analysis show that the Net cash inflow from operating activities account was 66% during
the FY 2009 and 50% during FY 2011 of Cash generated from operations. Thereafter it is
decreasing over the years and noticed as 56% loss during the FY 2013. This shows that the firm
is facing loss currently.

2.

Net cash inflow from investing activities

The analysis show that the Net cash inflow from investing activities account was -102% during
the FY 2009 and -9% during FY 2011 of Cash generated from operations. Thereafter it is
increasing over the years and noticed as 227% during the FY 2013. This shows that the firm is
getting profit currently.

3.

Net cash inflow from financing activities

The analysis show that the Net cash inflow from financing activities account was 34% during
the FY 2009 and -33% during FY 2011 of Cash generated from operations. Thereafter it is
decreasing over the years and noticed as -152% during the FY 2013. This shows that the firm is
facing loss currently.

4.

Cash and cash equivalents at the end of the year

The analysis show that Cash and cash equivalents at the end of the year account was -53%
during the FY 2009 and -48% during FY 2011 of Cash generated from operations. Thereafter it
is decreasing over the years and noticed as -373% during the FY 2013. This shows that the firm
is facing loss currently and dont have enough cash to finance its operations.

Liquidity Analysis

Liquidity ratios are used to determine a companys ability to meet its short-term debt
obligations. Investors often take a close look at liquidity ratios when performing
fundamental analysis on a firm. Since a company that is consistently having trouble meeting
its short-term debt is at a higher risk of bankruptcy, liquidity ratios are a good measure of
whether a company will be able to comfortably continue as a going concern.
1. Current Ratio
A liquidity ratio that measures a company's ability to pay short-term obligations. This ratio is
mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt
and payables) with its short-term assets (cash, inventory, receivables).
Current Ratio
Description
Current assets
Current liabilities
Current ratio

Current assets Current liabilities


2009
2010
2011
2012
17,087
17,459
19,005
13,448

2013
7,203

Average
14,840

12,700

16,648

21,461

17,559

17,392

17,152

1.35

1.05

0.89

0.77

0.41

Current Ratio
1.60
1.40

1.35

1.20

1.05

1.00
Current Ratio

0.89

0.80

0.77

0.60

0.41

0.40
0.20
0.00

2009

2010

2011
Years
Linear ()

2012

2013

31
Page
Current ratio measures the short term debt paying of the firm. The higher the current ratio,
the more capable the company is of paying its obligations. Calculations shows that the
current ratio of Pak-Arab fertilizers is following decreasing trend with a rate 0f 13% per year
as it was higher during the FY 2009. During the FY 2013 it was just 0.41. This shows that the
firm is losing its short term debt paying ability and firm is using its short term debts to
finance long term assets.
2. Quick Ratio
An indicator of a companys short-term liquidity. The quick ratio measures a companys ability
to meet its short-term obligations with its most liquid assets. For this reason, the ratio
excludes inventories from current assets. It measures the dollar amount of liquid assets
available for each dollar of current liabilities.
Quick Ratio
Description
Quick assets
Current
liabilities
Quick Ratio

(Current assets - Inventory & Prepayments) Current


liabilities
2009
2010
2011
2012
2013
12,414
12,202
14,364
8,691
3,487
12,700

16,648

21,461

17,559

17,392

0.98

0.73

0.67

0.49

0.20

Average
10,232
17,152
0.62

Quick Ratio
1.20
1.00

0.98
0.73

0.80
Quick Ratio

0.67

0.60

Quick Ratio
Linear (Quick Ratio)

0.49

0.40
0.20

0.20
0.00

2009

2010

2011

2012

2013

Years

The calculated results indicate that the ability of the Pak-Arab Fertilizers limited to pay its
short term debt is decreasing with a rate 0f 15% per year. During the FY2009 the value of
Quick ratio was highest after that it is declining to 0.20 till FY 2013. Its means that firm have
quick assets of PKR 0.20 against every PKR 1 of its currents liabilities.
3. Net Working Capital

33

Net working capital is used to measure the short-term liquidity of a business. The
Page

measurement can also be used to obtain a general impression of the ability of company
management to utilize assets in an efficient manner.
Net Working Capital
Description
Current assets
Current liabilities
Net Working Capital

2009
17,08
7
12,70
0
4,387

Current assets - Current liabilities


2010
2011
2012
2013
17,459

19,005

13,448

7,203

16,648

21,461

17,559

17,392

811

(2,456)

(4,111) (10,189)

Average
14,840
17,152
(2,312)

Net Working Capital


6,000

4,387

4,000
2,000
Net Working Capital

(2,000)
(4,000)
(6,000)

811
2009 2010 2011 2012 2013
(2,456)
(4,111)

(8,000)
(10,000)

(10,189)

(12,000)
Years

Net Working Capital


Linear (Net Working Capital)

The result of calculations showed that net working capital of the Pak-Arab fertilizers showing
decreasing trend with a rate 0f 66% per year as it was highest during the FY2009. Calculations
indicate that the firm had negative networking capital which shows that the firms short term
assets are very low.

Solvency Analysis
The ability of a company to meet its long-term financial obligations. Solvency is essential to
staying in business. A company that is insolvent must enter bankruptcy.
1. Debt Ratio
A financial ratio that measures the extent of a companys leverage. The debt ratio is defined
as the ratio of total debt to total assets, expressed in percentage, and can be interpreted as
the proportion of a companys assets that are financed by debt.
Debt Ratio
Description
Total assets
Total liabilities
Debt ratio

2009
52,126
34,803
67%

Total liabilities Total assets


2010
2011
2012
50,637
65,341
54,636
35,913
42,985
34,740
71%
66%
64%

2013
48,148
30,064
62%

Average
54,178
35,701
66%

35

72%

71%

Page

Debt Ratio
70%
68%
Debt Ratio

66%
64%

67%

66%

Debt Ratio

Linear (Debt Ratio)


64%

62%

62%
60%
58%

2009

2010

2011

2012

2013

Years

The result indicates that the debt ratio showing decreasing trend with a rate 0f 1.7% per year.
The debt portion in the assets of Pak-Arab limited were highest as 71 % in the FY 2010.
Gradually it is decreasing as the years are passing, during the FY2013 debt ratio is 62%. This
means that the company is financing its assets with equity and reducing its debt ratio.

2. Debt to Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by


stockholders' equity. It indicates what proportion of equity and debt the company is using to
finance its assets.
Debt to Equity Ratio
Description
Total equity
Total liabilities
Debt Equity Ratio

2009
17,323
34,803
201%

Total liabilities Total Equity


2010
2011
2012
14,724
22,356
19,896
35,913
42,985
34,740
244%
192%
175%

2013
18,084
30,064
166%

Average
18,477
35,701
196%

Debt to Equity Ratio


300%
250%
200%
Debt to equity ratio

244%
201%

192%

175%

166%

2012

2013

150%
100%
50%
0%

2009

2010

2011
Years

Debt to Equity Ratio

Linear (Debt to Equity Ratio)

37

This shows that the aggressiveness of Pak-Arab limited in financing its growth with debt. The
Page

above calculation shows that financial leverage of the company is at slightly decreasing trend
with a rate 0f 3.5% per year. During the YF 2010 the value was highest, as it was 244%.
Thereafter the values are decreasing, as it is 166% during the FY 2013. This shows the
company is showing less aggressiveness in the financing.
3. Capitalization Ratio
The capitalization ratio measures the debt component of a company's capital structure, or
capitalization to support a company's operations and growth.

Capitalization Ratio
Description

Long term debt Long term debt+ Shareholders equity


2009

2010

2011

2012

2013

Average

Total Long term Debt

22,103

19,265

21,524

17,181

12,672

18,549

Shareholders Equity

17,323

14,724

22,356

19,896

18,084

18,477

Capitalization Ratio

56%

57%

49%

46%

41%

50%

Capitalization Ratio
60%

56%

57%
49%

50%

46%

40%
Capitlization Ratio

41%

30%
20%
10%
0%

2009

2010

2011

2012

Years
Capitalization Ratio

Linear (Capitalization Ratio)

2013

The results of calculations show that the value of capitalization ratio is following decreasing
trend with a rate 0f 5.35% per year. Pak-Arab fertilizers limited had maximum debt in its
capital structure during FY 2010 as it was 57%. Thereafter company reduces its debt year by
year. The calculations of YF 2013 showed the value of capitalization ratio 41%. This shows that
the company is reducing is debt and financing its capital structure with equity.

Activity Ratio
Accounting ratios that measure a firm's ability to convert different accounts within its balance
sheets into cash or sales. Activity ratios are used to measure the relative efficiency of a firm
based on its use of its assets, leverage or other such balance sheet items. These ratios are
important in determining whether a company's management is doing a good enough job of
generating revenues, cash, etc. from its resources.

1. Accounts Payable Turnover


A short-term measure used to quantify the rate at which a company pays off its suppliers. The
measure shows investors how many times per period the company pays its average payable
amount.
Accounts Payable Turnover
Description
Cost of Goods Sale
Avg. Accounts Payables
Accounts Payable Turnover

Cost of Goods Sale


2009
2010
9,796
9,051
2,793
2,870
3.51
3.15

Avg. Accounts Payables


2011
2012
2013
7,188
6,221
7,143
2,503
1,896
1,273
2.87
3.28
5.61

Average
7,880
2,267
4

39
Page

Account Payable Turnover


6.00

5.61

5.00
4.00
Account Payable

3.51

3.00

3.15

2.87

2010

2011

3.28

2.00
1.00
0.00

2009

2012

2013

Years
Accounts Payable Turnover

Linear (Accounts Payable Turnover)

The above calculations shows that the value of account payable turnover ratio is following
increasing trend with a rate 0f 12 % per year. It is decreasing from FY 2009 to FY 2012 as it
was 3.51 times to 3.28 times respectively. Thereafter in FY 2013 the Value showed a boom
and it reached to 5.61 times. The results are showing that the Pak-Arab has reduced the days
of payments to its suppliers.
2. Average Payment Period

Average payment period means the average period taken by the company in making payments
to its creditors. It is computed by dividing the number of working days in a year by creditors
turnover ratio.

Avg. Payment Period


Description
Number of days
Accounts Payable Turnover
Avg. Payment Period

360 Accounts Payables Turn over


2009
2010
2011
2012
2013
360
360
360
360
360
4
3
3
3
6
102.64
114.15 125.33 109.72 64.16

Average
360
4
103

Avg. Payment Period


150.00
100.00
Avg. Payment Period

102.64

114.15

125.33

109.72
64.16

50.00
0.00

2009

2010

2011

2012

Years
Avg. Payment Period

Linear (Avg. Payment Period)

2013

41

The calculations show that the value of average payment period following decreasing trend
Page

with a rate 0f 7.5% per year. It is following slightly up and down trend from FY 2009 to FY
2012 as it was 103 day to 110 day respectively. During the FY 2013 results showed that the
Pak-Arab fertilizers limited paying its payables in 64 days.

3. Inventory Turn over


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

Inventory Turn over


Description
Cost of Goods Sold
Avg. Inventory
Inventory Turnover

Cost of Goods Sold Avg.


2009
2010
2011
9,796
9,051
7,188
1,880
2,095
2,447
5.21
4.32
2.94

Inventory
2012
2013
6,221
7,143
2,803
2,964
2.22
2.41

Average
7,880
2,438
3

Inventory Turn over


6.00

5.21

4.32

4.00
Inventory Turnover

2.94

2.00
0.00

2009

2010

2011

2.22

2.41

2012

2013

Years
Inventory Turn over

Linear (Inventory Turn over)

Above calculation shows that the inventory turnover of Pak-Arab Fertilizers limited is
following decreasing trend with a rate 0f 10.5% per year. It is decreasing by the FY 2009 to FY
2012. Thereafter the trend line shows a slightly increase in the value. The results of above
graph indicating that the company is not working efficiently as it is reducing inventory
turnover which cause to low profit and higher expenses.
4. Average Age of Inventory
The average number of days it takes for a firm to sell to consumers a product it is currently
holding as inventory.
Avg. Age of Inventory
Description
Days
Inventory Turnover
Age. Age of Inventory

2009
360
5
69.09

360 Inventory turn over


2010
2011
2012
360
360
360
4
3
2
83.33
122.53
162.21

2013
360
2
149.36

Average
360
3
117

Avg. Age of Inventory


Avg Age of inventory

200.00
150.00
100.00
50.00
0.00

69.09

83.33

2009

2010

122.53

2011

162.21

149.36

2012

2013

Years
Avg. Age of Inventory

Linear (Avg. Age of Inventory)

43

The calculation are indicating that the average age of inventory is showing an increasing
Page

trend with a rate 0f 23% per year throughout the trend line, it is increasing from FY2009 to FY
2012.thereafter in FY 2013 the value have a minor decrease. The result shows that the
holding time of inventory is increasing due to inefficiency. The inventory holding time is
almost double as compared to base year, which cause of less profit and high expenses.
5. Accounts Receive able Turn over
By maintaining accounts receivable, firms are indirectly extending interest-free loans to their
clients. A high ratio implies either that a company operates on a cash basis or that its
extension of credit and collection of accounts receivable is efficient. A low ratio implies the
company should re-assess its credit policies in order to ensure the timely collection of
imparted credit that is not earning interest for the firm.
Accounts Receive able Turn over
Description
Credit Sales
Avg. Account Receivable
Accounts Receive able Turn over

Credit sales Avg. Accounts Receivable


2009
2010
2011 2012
2013
8,241
5,434
6,190 6,613
3,327
1,427
1,639
1,371 731
362
5.78
3.32
4.52
9.05
9.19

Average
5,961
1,106
6

Accounts Receive able Turn over


10.00
Account Receivable turn over

5.78

5.00
0.00

2009

3.32

4.52

2010

2011
Years

Accounts Receive able Turn over


Linear (Accounts Receive able Turn over)

9.05

9.19

2012

2013

The calculation are indicating that the Account receivable turnover is showing increasing
trend with a rate 0f 11.8% per year. It is increasing from FY2012 to FY 2013.Before that during
the FY 2009 Company had an average value of account receivable turnover. Thereafter during
the FY 2010 to FY 2011 there was a significant decrease in the values. The results are showing
that the Pak-Arab fertilizers limited is focusing on the holding of their own money rather than
lending it.
6. Average Collection Period
The approximate amount of time that it takes for a business to receive payments owed, in
terms of receivables, from its customers and clients.
Avg. Collection Period
Description
Days
Accounts Receive able Turnover
Avg. Collection Period

360 Accounts Receive able Turn over


2009
2010
2011
2012
2013
360
360
360
360
360
6
3
5
9
9
39.1
62.34
108.58
79.71
39.77
7

Average
360
6
66

Avg. Collection Peroid

Avg. Collection Period

120.00
100.00
80.00
60.00
40.00
20.00
0.00

108.58
79.71
62.34

2009

2010

2011

39.77

39.17

2012

2013

Years
Avg. Collection Peroid

Linear (Avg. Collection Peroid )

45
Page
The calculation of above values show that the average collection period is showing decreasing
trend with a rate 0f 11.4% per year. During FY 2010 the value of average collection period was
highest as it was 109 days, thereafter its value is decreasing year by year. During FY 2013 the
value was 39 days. The results are showing that the Pak-Arab fertilizers limited is focusing on
getting back its cash.

Profitability Ratios
A class of financial metrics that are used to assess a business's ability to generate earnings as
compared to its expenses and other relevant costs incurred during a specific period of time.
For most of these ratios, having a higher value relative to a competitor's ratio or the same
ratio from a previous period is indicative that the company is doing well.
1. Gross Profit Ratio
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.
Gross Profit Ratio
Description

2009

Gross Profit Net Sales


2010
2011
2012

2013

Average

6,910
16,706
41.4%

Gross Profit
Net Sales
Gross Profit Ratio

9,197
18,248
50.4%

9,513
16,701
57.0%

1,915
8,136
23.5%

286
7,428
3.9%

5,564
13,444
35%

Gross Profit Ratio

G.P Ratio

60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%

50.4%

57.0%

41.4%
23.5%
3.9%
2009

2010

2011

2012

2013

Years
Gross Profit Ratio

Linear (Gross Profit Ratio)

The calculation shows that the gross Profit margin is showing decreasing trend with a rate 0f
18% per year. It is increasing from FY 2009 to FY 2011. Thereafter it shows that there was
significant decrease from FY 2012 to FY 2013 as it was just 3% of the sales. The results shows
that the cost of goods is increasing significantly.
2. Net Profit Margin
A ratio of profitability, measures how much out of every dollar of sales a company actually
keeps in earnings.

Net Profit
Net Sales
Net Profit Margin

47

Net Profit Net Sales


2009
2010
2011
2012
4,73
3,23
4,59
(240)
8
2
0
16,706 18,248 16,701
8,136
28.4%
17.7%
27.5%
-2.9%
Page

Net Profit Margin


Description

2013

Average

(1,825)
7,428
-24.6%

2,099
13,444
9%

Net Profit Margin


40.0%
30.0%

28.4%

20.0%
Net Profit Margin

10.0%
Net
Profit Margin
0.0%
2009
-10.0%

27.5%
17.7%
Linear (Net Profit
-2.9% Margin)
2010

2011

2012

2013

-20.0%
-24.6%

-30.0%
Years

Above calculations are showing that the net profit margin is following decreasing trend with a
rate 0f 37% per year throughout the graph except FY 2011 as it was 27.5%. The value of net
profit margin is becoming negative from the FY 2012 to till now. The results show that the
Pak-Arab fertilizers limited was earning 28%, 17.7 % and 17.5% profit from FY2009 to FY2010
respectively. There were ups and down in profit. Thereafter the in FY2012 there was 2.9 %

which was increased to 24.6 %. It means that the cost of goods sold and other expenses are
increasing.
3. Total Assets Turn over
The amount of sales or revenues generated per dollar of assets. The Asset Turnover ratio is an
indicator of the efficiency with which a company is deploying its assets.

Total Assets Turn over


Description
Net Sales
Total Assets
Total Assets Turn over

2009
16,706
52,126
0.32

Net Sales Total Assets


2010
2011
2012
18,248
16,701
8,136
51,382
57,989
59,989
0.36
0.29
0.14

2013
7,428
51,392
0.14

Average
13,444
54,575
0.25

Total Assets Turnover


0.40
0.32
0.35
0.30
0.25
0.20 Turnover
Total Assets
Total Asset turnover
0.15
0.10
0.05
0.00
2009

0.36
0.29

Linear (Total Assets Turnover)


0.14
0.14

2010

2011

2012

2013

Years

The calculations show that the value of total assets turnover is following decreasing trend
with a rate of 11% per year over the years. The highest value of total assets turnover can be
seen in the FY 2010.thereafter the value it is decreasing till FY 2012 and same for FY 2013.
The results show that the Pak-Arab was generating PKR 0.32 by investing every single Rupee
after that it is decreasing to 0.14 till FY 2013.
4. Return on Assets
An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to
how efficient management is at using its assets to generate earnings.

49

Net Profit Avg. Operating Assets


2009
2010
2011
2012
2013
4,738
3,232
4,590
(240)
(1,825)
52,126
51,382
57,989
59,989
51,392
9.09%
6.29%
7.92%
-0.40% -3.55%

Average
2,099
54,575
4%

Page

Return on Assets
Description
Net Profit
Avg. Operating Assets
Return on Assets

Return on Assets

ROA

10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
-2.00%
-4.00%
-6.00%

9.09%
6.29%

7.92%

Return on Assets
2009

2010

Linear (Return on Assets)


-0.40%
2011

2012

2013
-3.55%

Years

Since the calculations show that the value of ROA is following decreasing trend with a rate of
27.8% per year. Company was generating highest ROA during the FY 2009. Thereafter it tends
to decrease but during the FY 2011 once again there was a boom. During the FY 2012 the

company was facing losses so the return was slightly negative but in FY 2013 the value was
significantly negative.

5. Fixed Assets Turnover


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

Fixed Asset turnover


Description
Net Sales
Fixed Assets
Fixed Asset turnover

Net Sales Fixed Assets


2009
2010
2011
16,706 18,248
16,701
35,039 33,178
46,336
0.48
0.55
0.36

2012
8,136
41,188
0.20

2013
7,428
40,945
0.18

Average
13,444
39,337
0.35

Fixed Asstet turnover


0.60

0.48

0.55
0.36

0.40
Fixed Turnover

0.20
0.00

2009

2010

2011

0.20

0.18

2012

2013

Years
Fixed Asstet turnover

Linear (Fixed Asstet turnover)

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The calculation shows that the fixed assets turnover ratio is following decreasing trend over
the years with a rate 0f 12.5% per year. The highest value can be seen during the FY2010.
There after the values are decreasing to its lowest point during FY 2013. This means that the
company is earning very low return on investing every single rupee in the fixed assets.
6. Earnings Per Share
The portion of a company's profit allocated to each outstanding share of common stock.
Earnings per share serves as an indicator of a company's profitability.
Earnings Per Share
Description
Net Profit
No. of share out standing
Earnings Per Share

Net Profit
2009
4,738
450
10.529

No. of share out standing


2010
2011
2012
3,232
4,590
(240)
450
450
450
7.182
10.200
-0.533

2013
(1,825)
450
-4.056

Average
2,099
450
4.66

Earning Per Share


Earning Per Share

15.000
10.000
5.000
0.000
-5.000

10.529

7.182

10.200

-0.533
2009

2010

2011

2012

Years

Earning Per Share

Linear (Earning Per Share)

2013
-4.056

The above calculation shows that the value of earning per share is following decreasing trend
with a rate of 27.7% per year. The highest values can be seen that during the FY 2009 and FY
2010. Thereafter the value of earning per sharing was negative.
7. Dividend per share
The sum of declared dividends for every ordinary share issued.
Dividend per share
Description
Dividend
No. of share outstanding
Dividend per share

Dividend No. of share out standing


2009
2010
2011
2012
3,755
1,078
450
450
450
450
0.00
0.00
8.34
2.40

2013
450
0.00

Average
967
450
2.15

Dividend Per share


Dividend per Share

10.00
8.00
6.00
4.00
2.00
0.00

8.34

2.40
2009
0.00

2010
0.00

2011

2012

Years
Dividend per share

Linear (Dividend per share)

2013
0.00

53

The calculation shows that the company had given dividend during the FY 2011 and FY 2012
Page

only. It is decreasing with a rate 0f 35.6% per year.


8. Dividend Yield Ratio

A financial ratio that shows how much a company pays out in dividends each year relative to
its share price.
2009
39
0.00%

Description
Dividend
Market Price Per Share
Dividend Yield Ratio

2010
33
0.00%

2011
8
50
16.80%

2012
2
44
5.42%

2013
40
0.00%

Average
2
41
0.04

Dividend Yield Ratio


Dividend Yield

20.00%
15.00%
10.00%
5.00%
0.00%

16.80%
5.42%
0.00%
2009

0.00%
2010

2011

2012

Years
Dividend Yield Ratio

Linear (Dividend Yield Ratio)

0.00%
2013

The above calculations show that dividend yield ratio is showing decreasing trend with a rate
0f 33% per year. As the company had given the dividend. The dividend yield ratio is also can
be seen with highest value. Thereafter company is not giving any dividend.
9. Price Earnings Ratio
A valuation ratio of a company's current share price compared to its per-share earnings.
Price earnings Ratio
Description
Market Price
Earnings per share
Price earnings Ratio

Market Price per share Earning Per share


2009
2010
2011
2012
2013
39
33
50
44
40
10.529
7.182
10.200
(0.533)
(4.056)
3.66
4.56
4.87
-82.89
-9.91

Average
41
5
(15.94)

Price Earning Ratio


20.00
3.66
0.00
2009
-20.00
Price-40.00
earning Ratio
Price Earning Ratio
-60.00
-80.00
-100.00

4.56
2010

4.87
2011
2012
2013
-9.91
Linear (Price earning Ratio)

-82.89
Years

55

The above calculation shows that the value of price earnings ratio showing decreasing trend
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with a rate 0f 74% per year. The highest value can be seen during the FY 2010. Thereafter the
ratio is going negative form FY 2012.
10.Earning yield Ratio
The earnings per share for the most recent 12-month period divided by the current market
price per share.

Earning yield Ratio


Description
Earnings per share
Market Price Per Share
Earning yield Ratio

Earnings Per share Market Price per share


2009
2010
2011
2012
2013
10.529
7.182
10.200 (0.533)
(4.056)
39
27.35%

33
21.95%

50
20.53%

44
-1.21%

40
-10.09%

Average
4.664
41
11.71%

Earning Yield Ratio

Earning Yield Ratio

30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
-5.00%
-10.00%
-15.00%

27.35%
21.95%

20.53%

-1.21%
2009

2010

2011

2012

2013
-10.09%

Years
Earning yield Ratio

Linear (Earning yield Ratio)

The above calculations show that the value of earning yield ratio is following decreasing trend
with a rate 0f 27% per year throughout the last five years. The highest value can be seen
during the FY 2009. There after it tend to zero and then negative. The results are showing
company earned highest percentage on investing in stock during FY 2009 and then there is a
declined.

Bankruptcy Analysis
A legal proceeding involving a person or business that is unable to repay outstanding debts.
The bankruptcy process begins with a petition filed by the debtor or on behalf of creditors. All
of the debtor's assets are measured and evaluated, whereupon the assets are used to repay a
portion of outstanding debt. Upon the successful completion of bankruptcy proceedings, the
debtor is relieved of the debt obligations incurred prior to filing for bankruptcy. There are
two models to analyze.
1. Univariate Model
A univariate model uses a single variable. Such a model would use individual financial ratios
to forecast failure. The firm is classified as failed when any one of the following events are
occurred i.e. Bankruptcy, overdrawn bank account or nonpayment of preferred stock
dividend. Following ratios are the best for forecasting financial failure.
a. Cash Flow/total debt
The Cash Flow to Total Debt ratio measures the length of time it will take the company to pay
its total debt using only its cash flow.
cash flow/Total Debt Ratio
Description
Cash Flow
Total Debt
cash flow/Total Debt Ratio

Operating cash Flow/Total Debt


2009
2010
2011
2012
2013
6,711
4,109
4,023
(1,179) (682)
34,803 35,913
42,985
34,740 30,064
19%
11%
9%
-3%
-2%

Average
2,596
35,701
7.27%

Operating Cash Flow/Total Debt


25%
20%

19%

15%

Cash flow/debt

11%

10%

Operating Cash Flow/Total Debt

9%

Linear (Operating Cash


Flow/Total Debt)

5%
0%

2009

2010

2011

-5%

2012
-3%

Years

2013
-2%

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The above calculations show that the cash flow to debt ratio following decreasing trend over
the years with a rate 0f 22% per year. The highest value can be seen during the FY 2009 as it
was 19% which was fair. Thereafter the trend shows that the cash from operating actives of
Pak-Arab fertilizers limited is decreasing. The results are showing that the ability of company
to pay its debt is getting lower and the company have risker financial position.

b. Return on Assets
An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to
how efficient management is at using its assets to generate earnings.
Return on Assets
Description

2009

Net Income
Total Assets
Return on Assets

4,738
52,126
9.1%

Net income/Total Assets


2010
2011
2012
3,232
50,637
6.4%

4,590
65,341
7.0%

(240)
54,636
-0.4%

2013
(1,825
)
48,148
-3.8%

Average
2,099
54,178
3.87%

Return on Assets
10.0%

9.1%

8.0%

6.4%

7.0%

6.0%

Return on Assets
Linear (Return on Assets)

4.0%
2.0%
0.0%
-2.0%

2009

2010

-4.0%

2011

2012
-0.4%

2013
-3.8%

-6.0%

Since the calculations show that the value of ROA is following decreasing trend with a rate 0f
28.8% per year. Company was generating highest ROA during the FY 2009. Thereafter it tends
to decrease but during the FY 2011 once again there was a boom. During the FY 2012 the
company was facing losses so the return was slightly negative but in FY 2013 the value was
significantly negative. The results shows the management of the company is not working
efficiently and financial position of company is risker.
c. Debt Ratio
The debt ratio is defined as the ratio of total debt to total assets, expressed in percentage,
and can be interpreted as the proportion of a companys assets that are financed by debt.
Debt Ratio
Description
Total Liabilities
Total Assets
Debt Ratio

2009
34,803
52,126
67%

Total Liabilities/Total Assets


2010
2011
2012
35,913
42,985
34,740
50,637
65,341
54,636
71%
66%
64%

2013
30,064
48,148
62%

Average
35,701
54,178
65.90%

59

72%

Page

Debt Ratio
71%

70%
68%

67%

Debt Ratio
Linear (Debt Ratio)

66%

66%

64%

64%

62%

62%
60%
58%

2009

2010

2011

2012

2013

The calculations show that the debt ratio following decreasing trend over the previous five
years with a rate 0f 1.5% per year. The highest value can be seen during the FY 2010.
Thereafter the value of debt is decreasing till FY 20113.the results show that the debt
particle in the assets of Pak-Arab Fertilizers Company is decreasing with the financial
leverage is also lower.

1. Multi- variate Model


Edward I. Altman developed a multivatiate model to predict bankruptcy called Z score. That
distills five key performance ratios into a single score. As it turns out, the Z-score gives
investors a pretty good snapshot of corporate financial health.

((0.012X1)+(0.014X2)+(0.033X3)+(0.006X4)+(0.010X5))*100

Z-Score
Variables

X1
Years
2009
2010
2011
2012
2013

ZScore
Value

Wight
0.012
0.012
0.012
0.012
0.012

Rati
o
0.08
0.02
-0.04
-0.08
-0.21

X2
Wigh Rati
t
o
0.014 0.09
0.014 0.06
0.014 0.07
0.014 0.00
0.014 -0.04

X3
Wight
0.033
0.033
0.033
0.033
0.033

X4
Rati
o
0.10
0.09
0.10
-0.02
-0.06

Wight
0.006
0.006
0.006
0.006
0.006

Rati
o
0.50
0.41
0.52
0.57
0.60

X5
Wigh Rati
t
o
0.01
0.32
0.01
0.36
0.01
0.26
0.01
0.15
0.01
0.15

1.18
1.02
0.94
0.34
0.02

Z-Score Analysis
1.40
1.20

1.18
1.02

1.00

0.94

0.80

Z- score

0.60

0.34

0.40
0.20
0.00

0.02
2009

2010

2011

2012

2013

Years
Z-Score Analysis

Linear (Z-Score Analysis)

The calculations show that the value of Z score is following decreasing trend over the last five
years. The highest value can be seen during the FY 2009 as it is 1.18. it is too less form the
2.675.which means that the companys financial health is risky. Thereafter the value of Zscore is getting lesser and predicting that the company is more likely to bankrupt.

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Conclusion

It is observed that the Pak-Arab Fertilizer limited is one of the biggest Fertilizers Company in
the Pakistan. They are producing 6 % of the total urea produced in Pakistan and has a
monopoly in the production of CAN and NP.
The analysis shows that the Net profit of the company is showing negative value. Which
means that the company is facing loss from previous two years. On the other hand the sales of
the company are also decreasing, to reduce the burden company is reducing its costs and
expenses.
According the investors point of view the company is facing over losses during the two years
due to which Pak-Arab fertilizers is not providing any financial reward to its shareholders. The
market value of its common share is also decreasing so investor cannot get any financial
reward form investing in it.
Although Pak-Arab fertilizers limited have the capacity to generate profits but they are not
utilizing there production facilities. The basic reason is that the company required natural gas
to produce fertilizers. Due to crises of natural gas in Pakistan and special in Punjab Company
cannot fulfill the demand of its production.
The analysis shows the company have more liabilities than the resources due to which the
company have a risker financial position.

Recommendations
1. Company should produce alternative agro products.
2. They should reduce its cost and other expenses to avoid its bankruptcy chances.
3. They should migrate to sind or any place where they can easily get natural gas.
4. They should sell out there land which is located in populated area, with which they
can reduce their liabilities
5. They should hire highly-qualified and experience administration to avoid the any
mismanagement during migration.

References
1. http://www.fatima-group.com/pakarabfertilizers/aboutus.php
2. http://www.investopedia.com/
3. http://pakbiz.com/profile/Pak-Arab-Fertilizers-Pvt-Ltd/