Fauji Cement | Equity (Finance) | Dividend

PROJECT

REPORT &

OF

FINANCIAL REPORTING

ANALYSIS ON

“FAUJI
Submitted to:

CEMENT COMPANY”

Mr. Farrukh Naveed

Submitted By:

Hasan Qureshi Jawaad ul Hassan Rahiqa Fatima Humaira Akram

(29) (08) (21) (04)

MSc. (Accounting and Finance) 2nd Semester.

Department Of Commerce

1

FAUJI

CEMENT

COMPANY

LIMITED
Company Introduction
A longtime leader in the cement manufacturing industry, Fauji Cement Company, headquartered in Islamabad, operates a cement plant at Jhang Bahtar, Tehsil Fateh Jang, District Attock in the province of Punjab. The company has a strong and longstanding tradition of service, reliability, and quality that reaches back more than 10 years. Sponsored by Fauji Foundation the Company was incorporated in Rawalpindi in 1992. The cement plant operating in the Fauji Cement is one of the most efficient and best maintained in the country and has an annual production capacity of 1.165 million tons of cement. The quality portland cement produced at this plant is the best in the Country and is preferred the construction of highways, bridges, commercial and industrial complexes, residential homes, and a myriad of other structures needing speedy strengthening bond, fundamental to Pakistan's economic vitality and quality of life.

Company History
Fauji Cement Company Limited was sponsored by Fauji Foundation and incorporated as a public limited company on 23 November 1992. It obtained the Certificate of Commencement of Business on 22 May 1993. The company has been setup with primary objective of producing and selling Ordinary Portland Cement. For the purpose of selection of sound process technology, state of the art equipment, civil design and project monitoring, Local and Foreign Consultants were engaged. The company entered into a contract with World renowned cement plant manufacturers M/s F.L. Smith to carry out design , engineering, procurement, manufacturing, delivery, erection, installation, testing and commissioning at site of a new, state of the art, cement plant including all auxiliary and ancillary equipment, complete in all respects for the purpose of manufacturing a minimum of 3,000 tdp clinker and corresponding quantity of Ordinary Portland Cement as per Pakistan/British Standard Specifications. The contract came into force on January, 1, 1994. Physical work on the project started in August 1994. Commissioning activities started in May 1997 generally remained smooth and trouble free, which enabled first batch of clinker production on 26 September 1997 followed by cement production in November 1997. Subsequently in 2005, the Plant Capacity has been raised to 3,700 tons of clinker per day i.e. 3,885 tons of cement per day.

2

Corporate Profile
Board of Directors
Lt Gen Syed Arif Hasan, HI (M) (Retd) Lt Gen Javed Alam Khan, HI (M) (Retd) Mr. Qaiser Javed Mr. Riyaz H. Bokhari, IFU Brig Arif Rasul SI (M) (Retd) Qureshi, Brig Rahat Khan, SI (M) (Retd) Dr. Nadeem Inayat Chairman

Chief Executive Director Director Director Director Director Director Director Secretary

Brig Liaqat Ali (Retd) Brig Munawar Ahmed Rana (Retd) Brig Shabbir Ahmed (Retd)

Human Resources Committee
Dr. Nadeem Inayat Mr. Qaiser Javed President Member Member Secretary

Brig Liaqat Ali (Retd)
Brig Shabbir Ahmed (Retd) Audit Committee Mr. Qaiser Javed Mr. Riyaz H. Bokhari Brig Rahat Khan (Retd) Dr. Nadeem Inayat Brig Shabbir Ahmed (Retd) Technical Committee Brig Rahat Khan (Retd)

President Member Member Member Secretary

President

Brig Arif Rasul Qureshi (Retd) Brig Liaqat Ali (Retd) Mir Khawar Saleem, Director (Project)

Member Member
Secretary

3

Mission Statement
FCCL while maintaining its leading position in quality of cement and through greater market outreach will build up and improve its value addition with a view to ensuring optimum returns to the shareholders.

Our Vision
To transform FCCL into a role model cement manufacturing Company fully aware of generally accepted principles of corporate social responsibilities engaged in nation building through most efficient utilization of resources and optimally benefiting all stake holders while enjoying public respect and goodwill.

Our Objective
The company has been set up with the primary objective of producing and selling ordinary Portland cement. The finest quality of Cement is available for all type of customers whether for Dams, Canals, industrial structures, highways, commercial or residential needs using latest state of the art dry process Cement manufacturing process.

Our Values
Customers: We listen to our customers and improve our product to meet their present and future needs. People: Our success depends upon high performing people working together in a safe and healthy work place where diversity, development and team work are valued and recognized. Accountability: We expect superior performance and results. Our leaders set clear goals and expectations, are supportive and provide and seek frequent feed back. Citizen Ship: We support the communities where we do business, hold ourselves to the highest standards of ethical conduct and environment responsibility, and communicate openly with FCCL people and the public. 4

Financial Responsibility: We are prudent and effective in the use of the resources entrusted to us.

Product
Ordinary Portland Cement Clinker 94-95% Gypsum 5-6% 28 days strength up to 8000 P.S.I Fineness up to 3100 cm2/gm

Quality Policy
• • • •

EMPHASIS ON 100% CUSTOMER SATISFACTION. 100 % EFFECTIVE UTILIZATION OF PLANT CAPACITIES. EMPHASIS ON 100% TOP QUALITY HUMAN RESOURCES. EMPHASIS ON 100% QUALITY CULTURE.

TO REMAIN A LEADING MANUFACTURER OF PORTL

Income Statement Analysis
Fauji Cement Co Ltd
5

Summarized Income Statement For the Year Ended 30 June, 2003 To 2007 (in 000)
SALES Less : Sales tax and excise duty NET SALES 2003 Rupees 2,488,992 978,254 1,510,738 75,725 65,299 882 472,772 246,489 245,737 192,730 1,158,610 1,299,634 37,601 1,337,235 -2,104 1,335,131 175,607 2004 Rupees 3,247,262 951,031 2,296,231 115,164 91,289 952 564,591 310,041 243,056 238,876 1,357,516 1,563,969 -21,944 1,542,025 13,381 1,555,406 740,825 2005 Rupees 3,921,363 1,076,219 2,845,144 136,819 87,091 1,378 699,818 332,383 251,981 245,183 1,530,743 1,754,653 16,137 1,770,790 -7,223 1,763,567 1,081,577 2006 Rupees 5,683,456 1,397,317 4,286,139 205,751 142,070 2,562 843,909 393,785 261,566 325,001 1,826,823 2,174,644 -82,047 2,092,597 2,430 2,095,027 2,191,112 2007 Rupees 4,780,036 1,316,753 3,463,283 235,379 133,780 2,213 979,044 431,609 276,244 355,819 2,044,929 2,414,088 -21,550 2,392,538 -20,750 2,371,788 1,091,495

Less: Cost of sales
Raw Material Direct Labor

Factory Overhead
Rent Rate & Taxes Fuel Consumed Power Consumed Depreciation Other F.OH Total F.OH Total Manufacturing Cost Work in Process Cost of goods manufactured Finished goods Cost of Sales

Gross Profit Less Operating Expenses General & Admin Expenses
Salary, wages and benefits Traveling and entertainment Legal and Professional charges Other General and Admin Expenses Total

15,408 2,933 12,117 7,917 38,375 7,992 1,209 1,149 1,737 2,930 15,017 0 122,215

21,817 2,053 1,655 14,542 40,067 12,011 1,144 1,850 2,296 3,116 20,417 0 680,341

21,835 3,320 3,148 13,991 42,294 11,085 1,172 2,590 2,101 4,386 21,334 40,493 977,456

35,663 4,769 3,490 22,706 66,628 21,388 1,112 2,376 2,866 3,953 31,695 94,127 1,998,662

42,439 3,487 2,281 23,095 71,302 20,651 1,353 2,871 2,029 13,741 40,645 58,098 921,450

Selling and Distribution Expenses
Salary, wages and benefits Rent Rate & Taxes Communication Expenses Advertisement and sales Promotion Other selling expenses Total Other Operating Expenses

Operating Profit(EBIT)

Add Other income
Interest on Bank Accounts Interest on Long Term Advances Gain on Disposal of Fixed Assets Others Total 6,795 79 1,259 394 8,527 3,347 9,517 119 378 32,730 42,744 11,615 3,821 34 4,750 2,611 11,216 10,564 34,600 135 1,301 7,288 43,324 500 68,079 135 100 5,521 73,835 500

Less Financial charges
Fee and charges on Loans

6

Interest on Long term loans Mark up on Short term loans from Associations Interest on short term loans Others Total Less Amortization of Differed Cost Profit/ Loss Before Taxation Less Taxation Profit/loss after Taxation Earning/ (Loss) per share - Basic Earning/ (Loss) per share - Diluted

307,050 0 4,246 148,763 463,406 191,061 -523,725 7,650 -516,075 -1.43 -1.27

57,324 873 0 134,410 204,222 762,152 -243,289 557,439 314,150 0.85 0.75

175,784 3,185 4,353 35,748 229,634 0 759,038 248,548 510,490 1.38 1.22

254,030 456 1,095 8,215 264,296 0 1,777,690 573,951 1,203,739 3.25 2.87

200,642 0 779 5,184 207,105 0 788,180 141,857 646,323 1.74 1.54

Horizontal Analysis
Fauji Cement Co Ltd Income Statement (Horizontal Analysis) For the Year Ended 30 June, 2003 To 2007 2003 2004 2005
SALES Less: Sales tax and excise duty NET SALES

2006
228.34 142.84 283.71 271.71 217.57 290.48 178.50 159.76 106.44 168.63 157.67 167.33 -218.20 156.49 -115.49 156.92 1247.74

2007
192.05 134.60 229.24 310.83 204.87 250.91 207.09 175.10 112.41 184.62 176.50 185.75 -57.31 178.92 986.22 177.64 621.56

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

130.46 97.22 151.99 152.08 139.80 107.94 119.42 125.78 98.91 123.94 117.17 120.34 -58.36 115.31 -635.98 116.50 421.87

157.55 110.01 188.33 180.68 133.37 156.24 148.02 134.85 102.54 127.22 132.12 135.01 42.92 132.42 343.30 132.09 615.91

Less: Cost of sales
Raw Material Direct Labor

Factory Overhead
Rent Rate & Taxes Fuel Consumed Power Consumed Depreciation Other F.OH Total F.OH Total Manufacturing Cost Work in Process Cost of goods manufactured Finished goods Cost of Sales

Gross Profit Less Operating Expenses General & Admin Expenses
Salary, wages and benefits Traveling and entertainment Legal and Professional charges Other General and Admin Expenses Total

100.00% 100.00% 100.00% 100.00% 100.00%

141.60 70.00 13.66 183.68 104.41

141.71 113.19 25.98 176.72 110.21

231.46 162.60 28.80 286.80 173.62

275.43 118.89 18.82 291.71 185.80

7

Selling and Distribution Expenses
Salary, wages and benefits Rent Rate & Taxes Communication Expenses Advertisement and sales Promotion Other selling expenses Total

Operating Profit Add Other income
Interest on Bank Accounts Interest on Long Term Advances Gain on Disposal of Fixed Assets Others Total

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

150.29 94.62 161.01 132.18 106.35 135.96 556.68 140.06 150.63 30.02 8307.11 501.28 347.03 18.67 0.00 90.35 44.07 398.91 46.45 7286.78 -60.87

138.70 96.94 225.41 120.96 149.69 142.07 799.78 56.23 43.04 377.28 662.69 131.54 315.63 57.25 102.52 24.03 49.55 0.00 -144.93 3248.99 -98.92

267.62 91.98 206.79 165.00 134.91 211.06 1635.37 509.20 170.89 103.34 1849.75 508.08 14.94 82.73 25.79 5.52 57.03 0.00 -339.43 7502.63 -233.25

258.40 111.91 249.87 116.81 468.98 270.66 753.96 1001.90 170.89 7.94 1401.27 865.90 14.94 65.35 18.35 3.48 44.69 0.00 -150.50 1854.34 -125.24

Less Financial charges
Fee and charges on Loans Interest on Long term loans Interest on short term loans Others Total Less Amortization of Differed Cost Profit/ Loss Before Taxation Less Taxation Profit/loss after Taxation

8

Vertical Analysis
Fauji Cement Co Ltd Income Statement ( Vertical Analysis) For the Year Ended 30 June, 200…
SALES Less : Sales tax and excise duty NET SALES Raw Material Direct Labor

2003 2004 2005 2006 2007 100.00% 100.00% 100.00% 100.00% 100.00%
39.30 60.70 3.04 2.62 29.29 70.71 3.55 2.81 27.45 72.55 3.49 2.22 24.59 75.41 3.62 2.50 27.55 72.45 4.92 2.80

Factory Overhead Rent Rate & Taxes Fuel Consumed Power Consumed Depreciation Other F.OH Total F.OH Cost of Sales Gross Profit General & Admin Expenses Salary, wages and benefits Traveling and entertainment Legal and Professional charges Other General and Admin Expenses Total Selling and Distribution Expenses Salary, wages and benefits Rent Rate & Taxes Communication Expenses Advertisement and sales Promotion Other selling expenses Total Operating Profit Less Financial charges Fee and charges on Loans Interest on Long term loans Mark up on Short term loans from Associations Interest on short term loans Others Total

0.04 18.99 9.90 9.87 7.74 46.55
53.64

0.03 17.39 9.55 7.48 7.36 41.80
47.90

0.04 17.85 8.48 6.43 6.25 39.04
44.97

0.05 14.85 6.93 4.60 5.72 32.14
36.86

0.05 20.48 9.03 5.78 7.44 42.78
49.62

7.06 0.62 0.12 0.49 0.32 1.54 0.32 0.05 0.05 0.07 0.12 0.60 4.91 0.13 12.34 0.00 0.17 5.98 18.62

22.81 0.67 0.06 0.05 0.45 1.23 0.37 0.04 0.06 0.07 0.10 0.63 20.95 0.36 1.77 0.03 0.00 4.14 6.29

27.58 0.56 0.08 0.08 0.36 1.08 0.28 0.03 0.07 0.05 0.11 0.54 24.93 0.27 4.48 0.08 0.11 0.91 5.86

38.55 0.63 0.08 0.06 0.40 1.17 0.38 0.02 0.04 0.05 0.07 0.56 35.17 0.01 4.47 0.01 0.02 0.14 4.65

22.83 0.89 0.07 0.05 0.48 1.49 0.43 0.03 0.06 0.04 0.29 0.85 19.28 0.01 4.20 0.00 0.02 0.11 4.33

FAUJI CEMENT COMPANY
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BALANCE SHEET
FAUJI CEMENT COMPANY LIMITED BALANCE SHEET As On 2003 To 2007 2003 2004 2005 CURRENT ASSETS: Cash and Bank Balance Receivables Stock in Trade: Raw Material Work in process Finished goods: NON CURRENT ASSETS: Fixed assets Long term Deposits, Prepayments and Deferred cost Long Term Loans and Advances CURRENT LIABILITIES Current portion of long term loan Short term loans Other liabilities Non Current LIABILITIES Long term loans Provisions for staff Share Holders Equity Paid up capital Total Assets Total Liabilities Total Liabilities & Owner's Equity 721,338,365 193,992,231 60,721,925 47,962,326 10,149,401 5,816,672 31,996,253 5,591,918,365 4,581,054,157 21,600,000 40,000,000 472,332,789 137,390,439 15,914,497 319,027,853 421,593,774 4,188,487,125 27,450,649 1,624,986,187 1,624,986,187 6313256750 4688270563 6313256750 574,461,034 19,708,814 73,584,212 61,599,838 15,223,951 27,760,995 18,614,892 5,335,892,506 4,386,945,532 36,600,000 372,116,351 86,508,407 285,607,944 3,599,103,166 3,558,839,081 40,264,085 1,939,134,023 1,939,134,023 5910353540 3971219517 5910353540 1,113,721,603 603,109,660 8,235,163 55,931,122 18,468,968 11,624,101 2,588,053 5,110,066,731 4,717,315,487 46,611,000 9,000,000 1,137,589,149 552,995,000 308,876,433 275,717,716 2,567,217,891 2,522,005,000 45,212,891 2,449,624,461 2,449,624,461 6223788334 3774163873 6223788334

2006

2007

1,579,381,610 1,953,527 847,590,378 2,836,409 145,090,210 28,011,800 93,670,852 23,407,558 423,133 858,758 183,309 23,931 115,221 44,157

4,576,776,382 4,447,161 4,563,115,282 4,392,450 46,611,000 9,000,000 46,611 8,100

1,207,427,336 1,393,957 550,000,000 236,353,099 421,074,237 550,000 375,510 468,447

1,648,292,490 1,223,195 1,425,000,000 875,000 7,911,808 8,277 3,282,616,746 3,735,206 3,282,616,746 3,735,206 6198107892 6400688 2915491146 2665482 6198107892 6400688

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FAUJI CEMENT COMPANY BALANCE SHEET HORIZONTAL ANALYSIS As On 2003 To 2007

FAUJI CEMENT COMPANY LIMITED Balance Sheet Trend Analysis 2003 2004 2005 2006 CURRENT ASSETS: Cash and Bank Balance Receivables Stock in Trade: Raw Material Work in process Finished goods: NON CURRENT ASSETS: Fixed assets Long Term deposits Long Term Loans and Advances CURRENT LIABILITIES Current portion of long term loan Short term loans Other liabilities Non Current LIABILITIES Long term loans Provisions for staff Share Holders Equity Paid up capital Total Assets Total Liabilities Total Liabilities & Owner's Equity 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 80.00% 102.00% 121.00% 128.00% 150.00% 477.00% 58.00% 154.00% 219.00%

2007 0.27% 0.22% 1.4% 0.38% 0.24% 2% 14% 0.08% 0.09% 0.02% 0.02% 0.31% 0.40% 2.4% 0.15% 0.03% 0.02% 0.03%

310.00% 437.00% 14.00% 5.00% 116.00% 302.00% 182.00% 276.00% 200.00% 1610.00% 81.00% 73.00% 91.00% 103.00% 215.80% 22.50% 255.00% 82.00% 99.60% 215.80% 22.50% 268.00% 400.00% 148.00% 132.00% 39.00% 34.00% 28.00%

100.00% 95.00% 100.00% 95.00% 100.00% 169.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 78.00%

63.00% 402.00% 0.00% 1941.00% 89.50% 86.40% 61.00% 60.00% 164.70% 150.74% 150.74% 98.58% 80.50% 98.58%

100.00% 85.40% 100.00% 85.00% 100.00% 147.00% 100.00% 119.30% 100.00% 119.30% 100.00% 93.60% 100.00% 84.70% 100.00% 93.60%

202.00% 0.23% 202.00% 0.23% 98.17% 0.1013% 62.00% 0.05% 98.17% 0.1013%

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Ratio Analysis
Short Term Liquidity/ Short Term Debt Paying Ability
Short term liquidity ratios measure the short term debt paying ability of a company. If the entity cannot maintain debt paying ability it will not be able to maintain a long term debt paying ability nor it will be able to satisfy its stockholders. When analyzing the short term debt paying ability of the firm, we find a close relationship between the current assets and the current liabilities. Generally, the current liabilities will be paid with cash generated from the current assets. The profitability of the firm does not determine the short term debt paying ability.

• Day’s Sales in Receivable
The number of day’s sales in receivables relates the amount of the accounts receivable to the average daily sales on account. It is computed as follows, Day’s Sales in Acc/ Receivable = Average Gross Receivables / (Net Sales/365) Days
Days Sale in Account Receivable ( Amounts in Rs. “000”) Years 2003 2004 2005 2006 Gross Account Receivable 79,492 23,833 25,021 27,042 Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 Days Sale in Account 19.21 3.79 3.21 2.30 Receivable(Days) 2007 27,906 3,463,283 2.94

25.00 19.21 20.00 15.00 10.00 3.79 3.21 2.30 2.94 5.00 0.00 20032004200520062007 Years

Series1

12

Interpretation This ratio gives an indication of the length of time that the receivables have been outstanding at the end of the year. Shortening the credit terms indicates that there will be less risk in the collection of future receivables and a lengthening of the credit terms indicates a greater risk. In the above data we see that in year 2003 the days sales in account receivable is very high and it was not good for the company but after 2003 there is a great decrease in the days sales in inventory which show the good performance of the company’s management and it shows a less risk in the collection of future receivables.

• Account Receivable Turnover
This ratio indicates the liquidity of the receivables. It is computed by as follows Accounts Receivable Turnover = Net Sales / Average Gross Receivable
(Times/Year) Account Receivable Turn Over( Amounts in Rs. “000”) Years 2003 2004 2005 2006 Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 Gross Account Receivable 79,492 23,833 25,021 27,042 Account Receivable Turn 19.00 96.35 113.71 158.50 Over (Times/Year)
Account Receivable Turn Over (Time/Year)

2007 3,463,283 27,906 124.11

200.00 150.00 100.00 50.00 19.00 0.00 96.35

113.71

158.50 124.11 Series1

2003 2004 2005 2006 2007 Years

Interpretation From the above calculation it is shown that account receivable turnover is increasing with every year. It shows the liquidity of accounts receivable in terms of time per year. We see that in 2003 the account receivable turnover is too low and in 2004 there is a high increase in accounts receivable turnover and we see a gradual increase in the accounts receivable up to year 2006. In 2007 we see a great decline in accounts receivable turnover.

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• Days Sales in Inventory
The number of day’s sales in inventory ratio relates the amount of the ending inventory to the average daily cost of goods sold. It is computed as follows, Days Sales in Inventory = Ending Inventory / (Cost of Goods Sold/365) (Days)

Years Ending Inventory Cost of Goods Sold Days Sales in Inventory(Days)

Days Sales in Inventory ( Amounts in Rs. “000”) 2003 2004 2005 2006 236,602 259,000 353,806 635,978 1,335,131 1,555,406 1,763,567 2,095,027 64.68 60.78 73.23 110.80

2007 652,078 2,371,788 100.35

Days Sales in Inventory (Days)

110.80 120.00 100.35 100.00 73.23 80.00 64.68 60.78 60.00 40.00 20.00 0.00 2003 2004 2005 2006 2007 Years

Series1

Interpretation The day’s sales in inventory estimate the number of days that it will take to sell the current inventory. The lower the number of day’s sales in inventory, the better the inventory control. From the above data we see that there is a slight decrease in 2004 in day’s sales in inventory and it shows a good trend but after 2004 there is a high increase in the day’s sales in inventory to year 2006 which shows a weak inventory control of the management. In 2007 we see a little decrease in number of days in day’s sales inventory which indicates that management is trying to improve the inventory control system

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• Inventory Turnover
This ratio indicates the liquidity of the inventory. The formula is as follow, Inventory Turnover = Cost of Goods Sold / Average Inventory (Times/Year)
2007 2,371,788 652,078 3.64

Inventory Turnover ( Amounts in Rs. “000”) Years 2003 2004 2005 2006 Cost of Goods Sold 1,335,131 1,555,406 1,763,567 2,095,027 Ending Inventory 236,602 259,000 353,806 635,978 Inventory Turnover (Times) 5.64 6.01 4.98 3.29

Inventory Turnover (Times)

8.00 6.00 4.00 2.00 0.00 5.64

6.01

4.98 3.29 3.64 Series1

2003 2004 2005 2006 2007 Years

Interpretation
As shown in the table there is an increase in 2004 as compared to the base year. Whereas there is a decline in the inventory turnover in the following two years. On the other hand there is a slight rise in the ratio in last year. It is better for the company to have a high inventory turnover ratio .

• Working Capital
The working capital of a business is an indication of the short term solvency of the business. It is computed as follows Working Capital = Current Assets – Current Liabilities
Net Working Capital ( Amounts in Rs. “000”) 2003 2004 2005 2006 721,338 574,461 1,113,721 1,579,382 472332 372116 1206946 1267199 249006 202345 -93225 312183

Years Current Assets Current Liabilities Net Working Capital

2007 1,953,527 1442287 511240

15

Net Wor king Capi tal (in Rs)
600000 500000 400000 300000 200000 100000 0 -100000 -200000 Years 2003 2004 2005 2006 249006 202345 312183

511240

Series1

2007

Interpretation
In the first year there is decrease in the working capital. And then in the second year the working capital gone to the negative side. That decline is due to increase in the current liabilities. That in turn affected the short term solvency of the company. But in the coming years the working capital increase to a good extent. That on the other hand increased the solvency of the company. Higher ratio is better for the organization to get the short term loans from financial institutions.

• Current Ratio
The current ratio determines short term debt paying ability and is computed as follows Current Ratio = Current Assets / Current Liabilities
Years Current Assets Current Liabilities Current Ratio in Times Current Ratio ( Amounts in Rs. “000”) 2003 2004 2005 2006 721,338 574,461 1,113,721 1,579,382 472332 372116 1206946 1267199 1.53 1.54 0.92 1.25 2007 1,953,527 1442287 1.35

1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2003 1.53

Curr ent Rati o in Tim es

1.54 1.25 0.92 Series1 1.35

2004

2005 Years

2006

2007

16

Interpretation
In the above table the ratio is increasing in the first years that mean the company has more funds to pay its current liabilities. But in the coming year there is a decrease in the ratio. That affects the company’s debt paying ability. In the last two years the ratio increased due to increase in the current assets. So that is the positive sign for the company. It increases the short term, liquidity of the company and it attracts the short term loan providers on the cost of profitability.

• Acid Test Ratio / Quick Ratio
The acid test ratio relates the most liquid assets to current liabilities. Inventory is removed from current assets when computing the acid test ratio. Reason for removing inventory is that inventory may be slow moving or possibly obsolete and parts of the inventory may have been pledged to specific creditors. Acid Test Ratio / Quick Ratio = (Current Assets – Inventory) / Current Liabilities
Years Current Assets Inventory Current Liabilities Acid Test Ratio Acid Test Ratio ( Amounts in Rs. “000”) 2003 2004 2005 2006 721,338 574,461 1,113,721 1,579,382 236,602 259,000 353,806 635,978 472332 372116 1206946 1267199 1.03 0.85 0.63 0.74 2007 1,953,527 652,078 1442287 0.90

1.20 1.00 0.80 0.60 0.40 0.20 0.00

1.03

Acid Test Rati o (Tim es)

0.85 0.63

0.90 0.74 Series1

2003

2004

2005 Years

2006

2007

Interpretation
In the above table we can see that there is a decreasing trend in the ratio. This ratio is taken on the basis of quick assets (cash or cash equivalents). The main reason of the decline is the increase in the current liabilities. The other reason is increase in the inventory that decreases the required ratio.

17

• Cash Ratio
The best indicator for the company’s short term liquidity may be the cash ratio. It is computed as follows,
Cash Ratio = (Cash & Cash Equivalent + Marketable Securities) / Current Liabilities
Cash Ratio ( Amounts in Rs. “000”) 2003 2004 2005 193992 197088 603110 472332 0.41 372116 0.53 1206946 0.50

Years Cash & Cash Equivalent & Marketable Securities Current Liabilities Cash Ratio

2006 847590 1267199 0.67

2007 423133 1442287 0.29

0.80 Cash Ratio ( Times) 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 2003 2004 2005 Years 0.41 0.53 0.50

0.67

0.29

Series1

2006

2007

Interpretation A high cash ratio indicates that the firm is not using its cash to its best advantage. A cash ratio that is too low could indicate an immediate problem with paying bills.

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Long Term Liquidity / Long Term Debt Paying Ability
• Debt Ratio
The debt ratio indicates the firm’s long term debt paying ability. It is computed as follows Debt Ratio = Total Liabilities/Total Assets The debt ratio indicates the percentage of assets financed by creditors, and it helps to determine how well creditors are protected in case of insolvency. If creditors are not well protected, the company is not in a position to issues additional long term debt. From the prospective of long term debt paying ability, the lower the ratio, the better the company’s position.
Debt Ratio (Amounts in Rs. “000”) 2003 2004 2005 4,688,270 3,971,219 3,774,164 6313256 5910353 6223788 74.26% 67.19% 60.64%

Total Liabilities Total Assets Debt Ratio

2006 2,915,491 6198107 47.04%

2007 2,665,482 6400688 41.64%

80.00% 70.00% Debt Ratio (%age) 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

74.26% 67.19% 60.64% 47.04% 41.64% Series1

2003

2004

2005 Years

2006

2007

Interpretation
This table shows the current and past debt paying ratio of the company. The ratio in 2003 was 74.26% which was very high but after that till 2007 it is decreasing continuously and in 2007 it is 41.64% this decreasing trend shows the company is in better position as compare to 2003. Major reason of that decreasing trend is liabilities were decreasing year to year and liabilities decreasing due to increasing in the owner’s equity. 19

• Debt/Equity Ratio
It determines the entity’s long term debt paying ability. This computation compares the total debt with total share holder’s equity. This ratio also helps to determine how well creditors are protected in case of insolvency. From the prospective of long term debt paying ability, the lower the ratio, the better the company’s position. It is computed as follows: Debt/Equity Ratio =Total Liabilities/Shareholder’s Equity

Total Liabilities Shareholder's Equity Debt - Equty Ratio

Debt Equity Ratio (Amounts in Rs. “000”) 2003 2004 2005 4,688,270 3,971,219 3,774,164

2006 2,915,491

2007 2,665,482

1,624,98 6
288.51%

1,939,13 4
204.79%

2,449,62 4
154.07%

3,282,61 6
88.82%

3,735,20 6
71.36%

Debt / Equity Ratio ( %age)

350.00% 300.00% 250.00% 200.00% 150.00% 100.00% 50.00% 0.00%

288.51% 204.79% 154.07% 88.82% 71.36% Series1

2003

2004

2005 Years

2006

2007

Interpretation
This table shows the current and past debt/Equity ratio of the company. The ratio in 2003 was 288.51% which was very high but after that till 2007 it is decreasing continuously and in 2007 it is 71.36% this decreasing trend shows that company is in better position as compare to 2003. Major reason of that decreasing trend is liabilities were decreasing year to year and liabilities are decreasing due to increasing in the owner’s equity.

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• Debt to Tangible Net worth Ratio
The Debt to Tangible Net worth Ratio determines the entity’s long term debt paying ability. This ratio also helps to determine how well creditors are protected in case of insolvency. From the prospective of long term debt paying ability, the lower the ratio, the better the company’s position. The Debt to tangible net worth ratio is a more conservative ratio than either the Debt Ratio or the Debt/Equity Ratio. It eliminates Intangible assets, such as good will, trade marks, patents and copy right because they do not provide resources to pay creditors a very conservative position. It is computed as follows:

Debt to Tangible Net worth Ratio = Total Liabilities/Shareholder’s Equity – Intangible Assets
Debt To Tangible Net worth (Amounts in Rs. “000”) 2003 2004 2005 4,688,270 3,971,219 3,774,164 1,624,986 1,939,134 2,449,624 0 0 0 288.51% 204.79% 154.07%

Total Liabilities Shareholder's Equity Intangible Assets Debt To Tangible Net worth

2006 2,915,491 3,282,616 0 88.82%

2007 2,665,482 3,735,206 0 71.36%

Debt To Tangible Networth ( %age)

350.00% 300.00% 250.00% 200.00% 150.00% 100.00% 50.00% 0.00%

288.51% 204.79% 154.07% 88.82% 71.36%

Series1

2003

2004

2005 Years

2006

2007

Interpretation
This table shows the current and past Debt to Tangible Net worth of the company. The ratio in 2003 was 288.51% which was very high but after that till 2007 it is decreasing continuously and in 2007 it is 71.36% this decreasing trend shows that company is in better position as compare to 2003. Major reason of that decreasing trend is liabilities were decreasing year to year and liabilities are decreasing due to increasing in the owner’s equity.

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Times interest earned ratio
The times interest earned ratio indicates a firm’s long term debt paying ability from the income statement view. if the times interest earned is adequate, little danger exists that the firm will not be able to meet its obligations. If the firm has good coverage of the interest obligation, it should also be able to refinance the principle when it comes due. A relatively high stable coverage of interest over the year indicates the good record. A low fluctuation coverage from years to years indicates a poor record. It is computed as follows: Times interest earned ratio = EBIT/Interest
Interest Earned Ratio (Amounts in Rs. “000”) 2003 2004 2005 2006 EBIT 122,215 680,341 977,456 1,998,662 Interest Earned 6,874 9,636 3,855 34,735 Interest Earned Ratio 18 71 254 58 (Times)
Interset Earned Ratio (Times)

2007 921,450 68,214 14

300 200 100 0 2003 2004 71 18

254

58

Series1 14 2007

2005 Years

2006

Interpretation
The above table indicates the Time interest earned ratio which shows the firm will able to meet his obligation or not in 2003 interest earned was 18 times of operating profit but in 2004 it was 71 times and it increase further to 254 times in 2005 at that time company was strong in meeting its obligation but after 2005 it was decreased to 58 times in 2006 and 14 times in 2007 this shows company losing its position to meet the obligation.

Fixed Charge Coverage Ratio

The Fixed charge coverage ratio indicates a firm’s long term debt paying ability from the income statement view. The fixed charge ratio indicates a firms ability to cover fixed charges. It is computed as follows: Fixed Charge Coverage Ratio = EBIT + Lease payment/Interest + Lease payment + (Principle + preferred dividend) * 1/(1-T)

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Analysis of Profitability
Profitability is the ability of the firm to generate earnings. Profits are important to stockholders as derive revenue in the form of dividend and also important to creditors because profits are one source of funds for debt coverage. • Net Profit Margin

Net Profit Margin= Net Income before Minority shares of Earnings /Net Sale Net Profit Margin (Amounts in Rs. “000”) 2003 2004 2005 2006 -516,075 314,150 510,490 1,203,739 1,510,738 2,296,231 2,845,144 4,286,139 -34.16% 13.68% 17.94% 28.08% 2007 646,323 3,463,283 18.66%

Net Income Net Sales Net Profit Margin (%age)

40.00% 20.00% 0.00% -20.00%

Net Profi t Mar gin (%a ge)
2003 2004

28.08% 18.66% 17.94% 13.68% Series1 2005 2006 2007

-40.00% -34.16% Years

Interpretation
This ratio gives a measure of net income dollars generated by each dollar of sales. While it is desirable for this ratio to be high, competitive forces within an industry, economic conditions, use of debt financing, and operating characteristics such as high fixed cost will cause the net profit margin to vary between and within industries. • Total Asset Turnover

Total Assets Turnover= Net Sales/Average Total Assets
Total Assets Turnover (Amounts in Rs. “000”) 2003 2004 2005 2006 Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 Total Assets 6,313,256 5,910,353 6,223,788 6,198,107 Total Assets Turnover 0.24 0.39 0.46 0.69 (Times) 2007 3,463,283 6,400,688 0.54

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Total Assets Turnover (Times)

0.80 0.60 0.40 0.20 0.00 0.24 0.39 0.46

0.69 0.54 Series1

2003 2004 2005 2006 2007 Years

Interpretation It measures the activity of the assets and the ability of the firm to generate sales through the use of assets. The ratio is increasing and we can conclude that the cement company is efficiently using its assets to generate more sales and more profits. • Return on Assets

Return on Assets= Net Income before Minority Share of Earning /Average Total Assets
Net Income Total Assets Return on Assets (%age) Return on Assets (Amounts in Rs. “000”) 2003 2004 2005 2006 -516,075 314,150 510,490 1,203,739 6,313,256 5,910,353 6,223,788 6,198,107 -8.17% 5.32% 8.20% 19.42% 2007 646,323 6,400,688 10.10%

30.00% 20.00% 10.00% 0.00% 20032004200520062007 -10.00% -8.17% Years Interpretation It measures the firm’s ability to utilize its assets to create profits by comparing profits With the assets which generate the profits. In the base year the ratio is negative that is the bad sign for the company. But later wards it is increasing till the third year and it slope downwards in the last year. The reason behind that increase is the effective use of assets. The cement company is utilizing its assets in a better way to get more earnings. 19.42% 5.32% 8.20% 10.10% Series1

Retu rn on Ass ets

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Operating Income Margin

Operating Income Margin=Operating Income/Net Sales
Operating Income Margin (Amounts in Rs. “000”) 2003 2004 2005 2006 Operating Income EBIT 122,215 680,341 977,456 1,998,662 Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 Operating Income Margin 8.09% 29.63% 34.36% 46.63%
46.63% 34.36% 29.63% 8.09% 26.61% Series1

2007 921,450 3,463,283 26.61%

Operating Income Margin

50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

2003 2004 2005 2006 2007 Years

Interpretation It include only operating income in the numerator. After checking table we can say that there is an increasing trend in operating profit margin the coming three years. But it declined in the last year due to increase in the cost of sales. Management must focus on the cost to control in order earn more profits. • Operating Assets Turnover

Operating Assets Turnover=Net Sales/Average Operating Assets
Operating Assets Turnover (Amounts in Rs. “000”) 2003 2004 2005 2006 Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 Operating Assets 4,581,056 4,386,946 4,553,932 4,423,040 Operating Asets Turnover 0.33 0.52 0.62 0.97 (Times) 2007 3,463,283 4,259,642 0.81

1.20 1.00 0.80 0.60 0.40 0.20 0.00

Operating Assets Turnover(Times)

0.97 0.52 0.33 0.62

0.81 Series1

2003 2004 2005 2006 2007 Years

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Interpretation This ratio measures the ability of operating assets to generate sales dollars. In the table there is increasing trend in the ratio that can be identified that the company is using its assets in the best way it can utilize them. The best use of assets is giving the higher return on them. • Return on Operating Assets

Return on Operating Assets=Operating Income/Average Operating Assets
Return on Operating Assets (Amounts in Rs. “000”) 2003 2004 2005 2006 Net Income -516,075 314,150 510,490 1,203,739 Operating Assets 4,581,056 4,386,946 4,553,932 4,423,040 Return on Operating Assets -11.27% 7.16% 11.21% 27.22%
27.22% 11.21% 7.16% 15.17% Series1 2003 2004 2005 2006 2007 -11.27% Years

2007 646,323 4,259,642 15.17%

Return on Operating Assets

30.00% 20.00% 10.00% 0.00% -10.00% -20.00%

Interpretation The above table is showing that in the base year the operating assets are not utilizing to the best they can be. That’s why the ratio is negative in the base year. On the other the ratio is rising up there main reason behind that increase is the operating assets are utilizing in the best way. So it is important for the company should use its assets in the best manner it can.

Sales to Fixed Assets

It is computed as follows Sales to Fixed Assets = net sales / Average Total Fixed Assets This ratio measure the firms ability to make productive use of its property, plant and equipment by generating sales in Rupees.. When the fixed assets are low the ratio is substantially higher.
Sales to Fixed Assets (Amounts in Rs. “000”) 2003 2004 2005 2006 Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 Total Fixed Assets 4,581,056 4,386,946 4,553,932 4,423,040 Sales to Fixed Assets (Times) 0.33 0.52 0.62 0.97 2007 3,463,283 4,259,642 0.81

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Sales to Fixed Assets (Times)

1.20 1.00 0.80 0.60 0.40 0.20 0.00

0.97 0.52 0.33 0.62

0.81 Series1

2003 2004 2005 2006 2007 Years

Interpretation
This ratio shows the firms ability of productivity against the fixed assets and this table indicates that the sales to fixed assets which was 0.33 times in 2003 and 0.52 in 2004, 0.62 in 2005, 0.97 in 2006 and 0.81 in 2007 these figures shows that firms productivity against fixed assets increasing year to year but in 2007 it was decreasing due to the decrease in the firms Net sales and this analysis also shows that increase in sales have kept pace with net fixed asset increase •

Return on investment (ROI)

The return on investment measure the income earned on the invested capital. These types of measures are widely used to evaluate the enterprise performance. Since return on investment is a type of return on capital, this ratio measures the ability of the firm to reward those who provide long term funds and to attract providers of future funds. Compute the Return on investment = net income + (interest) (1- Tax Rate)/Avg. (Long Term Debt+ Equity) It measures the earning on investment and indicates how well the firm utilizes its assets base.
Return on Investment (Amounts in Rs. “000”) 2003 2004 2005 2006 Net Income -516,075 314,150 510,490 1,203,739 Interest 463,406 204,222 229,634 264,296 Tax 185,362 81,689 91,854 105,718 Long Term Debts & Equity 5,840,924 5,538,237 5,016,842 4,930,908 Return on Investment -4.08% 7.88% 12.92% 27.63% 2007 646,323 207,105 82,842 4,958,401 15.54%

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Return on Investment

30.00% 20.00% 10.00% 0.00%

27.63% 12.92% 7.88% 15.54% Series1

2003 2004 2005 2006 2007 -10.00% -4.08% Years

Interpretation
In the above the Return on investment in 2003 is -4.08% but in 2004 to 2006 there is an increasing trend but after that in 2007 it again decreases to 15.54% from 27.63%. The reason behind this that company’s long term debt decreases over five years. Also net income from 2003 to 2006.

Return on Total Equity

This ratio measure the return to both common and preferred shareholders. It is computed as Return on Total Equity =Net income – Redeemable preferred stock Dividend / Avg. Total Equity
Return on Total Equity (Amounts in Rs. “000”) 2003 2004 2005 2006 Net Income -516,075 314,150 510,490 1,203,739 Redeemable P/Stock Dividend 0 0 0 0 Total Equity 1,624,986 1,939,134 2,449,624 3,282,616 Return on Total Equity -31.76% 16.20% 20.84% 36.67% 2007 646,323 0 3,735,206 17.30%

Return on Total Equity

60.00% 40.00% 20.00% 0.00% -20.00% 2003 2004 2005 2006 2007 36.67% 20.84% 16.20% 17.30% Series1

-40.00% -31.76% Years

Interpretation
In the above the Return on Total equity in 2003 is -31.76% but in 2004 to 2006 there is an increasing trend but after that in 2007 it again decreases to 17.30% from 36.67%. the reason behind this that company’s long term debt decreases over five years. Also there is an increasing trend in Total equity in five years. Net income also increases from 2003-06. 28

Return on common Equity

This ratio measures the return to common shareholder, the residual owner. Compute the return on common equity as follows Return on common Equity = Net income –Preferred stock Dividend / Avg. common equity
Return on Common Equity (Amounts in Rs. “000”) 2003 2004 2005 2006 Net Income -516,075 314,150 510,490 1,203,739 P/Stock Dividend 0 0 0 0 Common Equity 3707430 3707430 3707430 3707430 Return on Common Equity -13.92% 8.47% 13.77% 32.47% 2007 646,323 8361 3707430 17.21%

Return on Common Equity

40.00% 30.00% 20.00% 10.00% 0.00% -10.00%

32.47% 13.77% 8.47% 17.21% Series1

2003 2004 2005 2006 2007 Years

-20.00% -13.92%

Interpretation
In the above the Return on Common equity in 2003 is -13.92% but in 2004 to 2006 there is an increasing trend but after that in 2007 it again decreases to 17.21% from 32.47%. the reason behind this that company’s long term debt decreases over five years. Also there is an increasing trend in Total equity in five years. Net income also increases from 2003-06.

Gross profit Margin

Gross profit equals the difference between net sales revenue and the cost of goods sold. Gross profit Margin = Gross profit / Net sales Gross profit margin analysis helps a number of users. Manager’s budget gross profit levels into their predictions of profitability. Gross profit margin is also use in cost control. Gross profit margin can also be used to estimate inventory involved in insured loses.
Gross Profit Margin (Amounts in Rs. “000”) 2003 2004 2005 2006 175,607 740,825 1,081,577 2,191,112 1,510,738 2,296,231 2,845,144 4,286,139 11.62% 32.26% 38.01% 51.12% 2007 1,091,495 3,463,283 31.52%

Gross Profit Net Sales Gross Profit Margin

29

Interpretation
In this table the gross profit margin has inclined substantially over the 1st four years from 2003 to 2006 after that in 2007 the Gross profit Margin decreased by 31.52%.The increase in Gross profit margin is due to increase in Net sales and Gross profit. The increase in Gross profit is also due to  The cost of buying inventory has decreased in 1st four years but increased in last year (2007).  Selling price has inclined.

Analysis for Investor
• Degree of Financial Leverage

Degree of financial leverage is the multiplication factor by which the net income changes as compare to the change in EBIT. Degree of Financial Leverage=%age change in Net income/%age change in EBIT The degree of financial leverage represents a particular base level of income. If earning before interest increases the financial leverage will be favorable if earning before interest decreases the financial leverage will be un favorable.
Degree of Financial Leverage (Amounts in Rs. “000”) Years 2003 2004 2005 %age Change in Net Income -367.12 39.12 62.5 %age Change in EBIT -61.5 456.67 43.67 Degree of Financial Leverage 5.97 0.09 1.43
8.00 6.00 4.00 2.00 0.00 2003 2004 2005 2006 2007 Years 1.43 0.09 1.30 0.86

2006 135.8 104.5 1.30

2007 -46.23 -53.9 0.86

Degree of Financial Leverage

5.97 Series1

Interpretation
In the above table we have seen that in 1st year the degree of financial leverage is 5.97 but in 2004 id decreases to 0.09 there is a very huge gap after that it increases in 2005 to 1.43 and again there is a slight decrease by 0.13 in 2006 and in last year it again decreases to 0.86. In 2004 EBIT is increases it means financial leverage is favorable as compare to 2003 where EBIT is very less and financial leverage is unfavorable then in last three years again financial leverage is favorable.

Earning per Common Share
30

The amount of income earned on a share of common stock during an accounting period is called earning per common share. Earning per Common Share involves net income p/s dividends declared accumulated and the weighted average number of share outstanding. Earning per Common Share=net income-preferred dividend/Weighted average number of common shares outstanding
Earning Per Common Share (Amounts in Rs. “000”) 2003 2004 2005 Net Income -516,075 314,150 510,490 Preferred Dividend 0 0 0 Weighted Avg. No. of Common Share O/S 370743 370743 370743 Earning Per Common Share -PKR 1.39 PKR 0.85 PKR 1.38
Earning Per Common

2006 1,203,739 0 370743 PKR 3.25

2007 646,323 8361 370743 PKR 1.72

P R4 0 K .0 Share P R3 0 K .0 P R2 0 K .0 P R1 0 K .0 P R0 0 K .0 - K 1 0 P R .0 - K 2 0 P R .0 20 03 - K 1 9 P R .3 20 04

P R3 5 K .2 P R1 8 K .3 P R0 5 K .8 P R1 2 K .7 Sr s eie 1 20 06 20 07

20 05 Y as er

Interpretation
In the above in 2003 the earning per common share is negative and this is due to loss on sales. The earning per share is rising in the coming three years. That attracts the investors who want the profit maximization. There is decrease in the EPS in the last year as compared to the subsequent years.

Price/Earning Ratio

Price per Earning Ratio expresses the relationship between the market price of a share of common stock and that stock’s current earning per share. Price per earning ratio = Market price per common share /Diluted earning per share Where diluted earning per share is basic earning per share if company only presents basic earning per share.

Percentage of earnings Retained

Percentage of earnings retained = Net income –All dividends / Net income

It is better for trend analysis if non recurring items are remove.

Dividend payout Ratio
31

The dividend payout ratio measures the portion of current earnings per common share being paid out in dividends. Dividend payout = Dividend per common share / Diluted earnings per share

Dividend yield
The dividend yield indicates the relationship between the dividends per common share and the market price per common share.

Dividend yield = Dividend per common share / market price per common share • Book Value per Share

It indicates the amount of shareholder’s equity that relates to each share of outstanding common stock.

Book value per share= Total shareholder’s equity-preferred stock equity/Number of common share outstanding
Book value is of limited use to the investment analyst since it is based on Historical cost. When market value is below book value, investors view the company as lacking potential. A market value above book value indicates that investors view the company as having enough potential to be worth more than the un recovered cost.
Book Value Per Share (Amounts in Rs. “000”) 2003 2004 2005 Total Shareholder's Equity 1,624,986 1,939,134 2,449,624 Preferred Stock Equity 486,992 486,992 486,992 No. of Common Stock O/S 370743 370743 370743 Book Value Per Share 3.07 3.92 5.29 2006 3,282,616 486,992 370743 7.54 2007 3,735,206 486,992 370743 8.76

Book Valur Per Share

10.00 8.00 6.00 4.00 2.00 0.00 2003 2004 3.07 3.92 5.29

7.54

8.76

Series1

2005 2006 2007 Years

Interpretation
The book value per share is increasing in the coming years. The reason of that rise is that the total common shareholder’s equity is increasing in the coming years. That is very good for the investors to earn more on their investments. The owners of the cement company are increasing as compared to the base year.

Multivariate Model
32

This model uses five financial ratios weighted in order to maximize the predictive power of model. The model produces an overall discriminate score called a Z-Score. Z= 0.012 X1+0.014X2+0.033X3+0.006X4+0.010X5 X1 = Working Capital/Total Assets This computation is a measure of the net liquid assets of the firm relative to the total capitalization. X1
Working capital Total Assets X1 2003 249006 6,313,256 0.04 2004 202345 5,910,353 0.03 2005 -93225 6,223,788 -0.01 2006 312183 6,198,107 0.05 2007 511240 6,400,688 0.08

X2 = Retained earnings/total assets This variable measures cumulative profitability over time. X2
Retain earning Total Assets X2 2003 0 6,313,256 0 2004 0 5,910,353 0 2005 0 6,223,788 0 2006 0 6,198,107 0 2007 0 6,400,688 0

X3= Earning Before Interest & Taxes/Total Assets This variable measure the productivity of the firm’s assets abstracting any tax or leverage factors. X3
2003 122,215 6,313,256 0.02 2004 680,341 5,910,353 0.12 2005 977,456 6,223,788 0.16 2006 1,998,662 6,198,107 0.32 2007 921,450 6,400,688 0.14

Operating Profit(EBIT) Total Assets X3

X4= Market Value of Equity/Book Value of Total Debt This variable measures how much the firms assets can decline in value before the liabilities exceeds the assets and the firm becomes insolvent. X4
2003 Market value of equity Book value of Total Debts 4,688,270 2004 3,971,219 2005 3,774,164 2006 2,915,491 2007 2,665,482

X5= Sales/Total Assets This variable measure the sales generating ability of the firm’s assets. 33

X5
Sales Total Assets X5 2003 1510738 6,313,256 0.24 2004 2296231 5,910,353 0.39 2005 2845144 6,223,788 0.46 2006 4286139 6,198,107 0.69 2007 3463283 6,400,688 0.54

0.0200 Z-score 0.0150 0.0100

0.0182 0.0111 Series1

0.0096 0.0081

0.0050 0.0035 0.0000 2003 2004 2005 2006 2007 Years

CONCLUSIONS AND RECOMMENDATIONS
From the above information we conclude that cement sector in one of the prosperous sector in the Pakistan’s economy. The potential investors should take their chances investing in the cement sector through stock exchanges. The Fauji cement country has proved itself as one of the leading cement factories of the country. The trade mark of Fauji Foundation gives a sign of credibility in the minds of the investors. Since Pakistan is a developing country and for expanding infrastructure and developmental projects, the need of the cement is very obvious. Fauji cement has been providing 63% of the cement in the country as well as exporting to countries like Afghanistan and Bangladesh. It is strongly recommended that Fauji Cement should expand its business and should establish the strategies of going global.

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