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FINANCIAL

STATEMENT
ANALYSIS OF MTM

14-16

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Session 2017-2019

Submitted to:
Lecturer (Mr. Abrar Hussain)

Submitted by:
Atiqa Yousaf
Roll No. BB15104
BBA (B) 5th Semester
Morning

Punjab university Gujranwala campus


Date of submission: 16th February, 2018

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DEDICATION

“At first I like to thank our beloved Allah. we would like to thanks our Sir. Abrar Hussain who always try to
find ways and thinks to provide which we do not know and don’t have and also thanks for giving us the
opportunity to enhance our knowledge on the subject.

We are also grateful for his support and encouragement all throughout. And also this report is dedicated to our
Parents which are entire source of motivation and seeking goals they support us in every walk of life and always
encourage us to work hard.

Special thanks to our worthy Parents Words are really inadequate to express how much Grateful we are the
untiring help and Encouragement they provided. We are very thankful to our parents specially and we wish
them a long life.”

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Acknowledgment
All praises belong to almighty Allah who the supreme authority knows the ultimate relation underlying all sorts
of phenomenon going on in this universe & whose blessing & exaltation flourished my thought & thrived my
ambitions to have the cherished fruit of my modest efforts my humblest thanks to the Holy Prophet Hazrat
Muhammad (PBUH) who is forever a torch of guidance & knowledge for humanity as a whole.

We deem it our utmost pleasure to avail this opportunity to express gratitude & deep sense of obligation to my
revered teachers for their valuable and dexterous guidance, untiring help, compassionate attitude, kind behavior,
moral support and enlightened supervision during this whole project.

Finally, I would like to extend great thanks to my adoring parents and friends for their day and night prayers
sacrifices and encouragement, moral and financial support throughout the project of our study.

May all of them live long and enjoy a happy life!

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Letter Of Acceptance

Respected Sir,

We accept the offer to write the report on the topic “Financial reporting and analysis” and we promise to fulfill
the terms of conditions and reference. We are very delighted to confirm our acceptance for the task of preparing
a report that you have assigned us. This report covers all the aspects that have been asked. .

Yours sincerely,
Atiqa Yousaf (BB15104)

BBA (Hons.) 5th Semester, Morning


University of the Punjab
Gujranwala campus

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Letter of Transmital
Sir. Abrar Hussain
Lecturer
Punjab University Gujranwala campus
Gujranwala, Pakistan

Respected Sir,
Here is the report you asked us to prepare. It consists of the business financial position of the company “Masood
textile Mill”. In a business cycle the status which “Masood Textile Mill” is enjoying is called “BOOM”. They
are not afraid of competitors or threats. It also includes the list of products which are offered by “Masood textile
Mill” in Pakistan. History of “Masood textile company” is also given to aware the readers that how “Masood
textile Mill” has earned this name & fame.
We find this task with knowledgeable and interesting. We tried our best to prepare an effective report.
We also thankful to you for your support and special attention. We appreciate the Punjab university Gujranwala
campus for providing us great opportunity to work on this project. This is such a great opportunity to get
experience.

Yours sincerely,
Atiqa Yousaf (BB15104)

BBA(Hons.) 5TH Semester, Morning


university of the Punjab
Gujranwala campus

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Contents

DEDICATION ........................................................................................................... 4

ACKNOWLEDGMENT ............................................................................................. 5

LETTER OF TRANSMITAL ...................................................................................... 7

TABLE OF TABLES ........................... ERROR! BOOKMARK NOT DEFINED.

EXECUTIVE SUMMARY .......................................................................................... 3

THE INTRODUCTION MTM ................................................................................. 10

BALANCE SHEET AT YEAR ENDED 31ST DEC ................................................... 20

INCOME STATEMENT FOR YEAR ENDED 31ST DEC ........................................ 21

RATIOS ANALYSIS .............................................................................................. 22


Conclusion: .......................................................................................................................................................... 27

VERTICAL ANALYSIS………………………………………………………………….28
HORIZONTAL ANALYSIS………………………………………………............................30

CONCLUSION………………………………………………………………………………32

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Executive Summary
This project is based on measuring the financial position of Masood Textile Mill. This project involves the
analysis of the financial statements of Masood Textile Mills Ltd from year 2014 to 2016. Company facing a
problem in making sensible profit.

For this purpose, I take the balance sheet and profit loss account values and then using the ratio analysis to
check out the organization’s position, performance, and efficiency in operations and also uses of financial
techniques in financial statements and do ratio analysis and its competitor company ratio analysis use as a bench
mark that is the first part of our project than I apply the capital budgeting criteria on these cash flows after 15%
increment than I apply the dividend model in which I calculate the dividend and also calculate the price of stock
to Masood Textile company in each year.

Masood textile is one of the largest knitted garment manufacturers of Pakistan. The company is 100% export
oriented. U.S.A. and Europe are the major markets of Masood textile company. It is a quality conscious
company. The company is ISO 9002 certified. Company’ mission statement is “To be the world’s best Apparel
Company.”

Masood Textile is a big name in knitted garments. Its working environment is simply the best in Faisalabad.
The company has fully equipped cutting, stitching and packing units. Its quality assurance system is one of the
best in Pakistan. Recently it wins “Best supplier awards 2001-02” from JC Penny the World Wide stores chain.
The company’s infrastructure is good. Offices are fully furnished. The company is centrally air-conditioned.
The company is working in “Papers less” environment. Computerized bar coding and back tracking system are
there. Company has good warehousing capacity for fabrics and garments. Customer portfolio of the company is
very broad. World leaders in Apparel are working with MTM. Company has no separate marketing department.
CEO and Marketing Manager of the company perform marketing functions individually.

Company is engaged in merchandising and its merchandising department is very efficient for taking orders and
fulfilling them accordingly. Company’s decision making is centralized. All major decisions are made by higher
management and implemented by lower management.

Now Company is giving preference to its personals separate personnel department is established and a ladies
wing is also incorporated. Financially the company is performing well. Its sales are increasing and its profits are
rapidly growing.

Simply we can say that Masood Textile Apparel Division is performing well.

I have been selected this company after seeing its good performance and strong development strategies, and all
the data are easily available on internet we can easily find and information about company financial statements.

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The Introduction MTM

Ch. Nazir Ahmed who was the founder established Masood Textile mills limited in 1984 and now ch. Shahid
nazir is the chief executive. The Masood textile mill is established under the company ordinance 1984.
The company has latest equipment and machinery to serve globally. The company has modern computerized
networking system. All the Accounting and finance relating work is carried out through computer. The
company has capability in fabric, ginning spinning, knitting laundry and apparel manufacturing.

The company’s apparel division, which is producing high quality garments, is situated at Sargodha road, near
singed cinema, fasialabad. But its registered office has shifted to canal road Faisalabad.

The company implements the quality system and had awarded ISO 9002 certificate. The company maintains
quality standard at all levels to establish consistency and efficiency. The company is exporting its products to
U.S.A.U.K. and Germany

History of MTM
Masood Textile mills were incorporated in 1984 with 4 spinning mills. It is a public limited company with its
registered office at Faisalabad and listed in all stock exchanges of Pakistan. It is vertically integrated textile
unit. It has its own spinning, knitting, processing and stitching units. Initially it was engaged only in spinning.
But in 1993 company changed its strategy in adding up most process and disposed off three spinning units. In
1995 company made its own garments units with only 35 stitching machines but today it has about 1000
stitching machines of different brands. All credit of this success goes to visionary personality of Mr. Shahid
Nazir, the Chief Executive of the company.

They strive to lead in creating, developing and manufacturing of knitted apparel products right from basic to
highly fashioned garments thus responding to emerging trends in the industry. They translate conceptual ideas
of our customers into reality and shape them through our technical bent and professional acumen.

Business Principle of Company

Corporate Objectives
To maximize the wealth of shareholders, increase market shares and achieve customer satis-faction. Making
arrangements towards achieving total quality standards, to get growth through professional management, to
reduce the cost of production up to minimum level, to control the atmosphere by installation of latest
machinery, to continue to improve / surpass past achievement. To lead the local manufacturers, attain a good
word of mouth and to make company image stronger in the international market.

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Vision Statement

 A leading producer of textile products by producing the highest quality of products ad services to its
customers.
 To strive for excellence through commitment, integrity, honesty and team work.
 Highly ethical company and be repeated corporate citizen to continue playing due role in the social and
environmental sectors of the company.
 To develop and extremely motivated and professional trained work force, which would drive growth
through innovation and renovation.
 Sustained growth in earning in real terms.

Mission Statement:

Our mission is to be a dynamic, profitable and growth oriented company by providing good return on
investment to its shareholders and investors, quality products to its customers, a secured and friendly
environment place of work to its employees and to project Pakistan’s image in the international market.

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Management Hierarchy in MTM

Top Management Chief Executive


Officer

General Manager

Middle Management
Manager

Senior Deputy Assistant Officer


Officer Manager Manager

Lower Level Management


Supervisor

Helpers Foreman Operators

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PRODUCTS
Yarn
Knitted Fabric
Garments

BACK TRACK SYSTEM


Masood Textile Mills is the only textile mill in Pakistan with latest computerized Barcode System that assures
quality in every operation of production from spinning to packing. Products of each department carry bar coded
stickers, which bear all the details and history of the operations of that product. Hence if any problem is reported,
one can trace back the root of the problem and enable to prevent occurrence of the same in future.

STITCHING DIVERSITY
With over 1,749 stitching machines, MTM is producing about 120,000 dozen per month of fashion garments like
Polo, Rugby and Henley shirts along with basic garments like Crew Neck Tee, Sweat shirt, Boxer shorts and
Bikinis. MTM has in-house Embroidery facility equipped with Tajima machines.

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Ratio Analysis

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I. Financial Statements

Financial statements (or financial report) are the formal records of the financial activities of a business,
.
person, or other entity Here we will discuss the Balance Sheet and Income Statement that are the business’s
financial statements.

A. Balance Sheet

A balance sheet also referred to as a statement of financial position, reports on a company's assets, liabilities, and
ownership equity at a given point in time.

B. Income Statement

An income statement, also known as a statement of comprehensive income, statement of revenue & expense,
P&L or profit and loss report, reports on a company's income, expenses, and profits over a period of time. A
profit and loss statement provides information on the operation of the enterprise. These include sales and the
various expenses incurred during the stated period.

I. Ratios Analysis

It refers to the systematic use of ratios to interpret the financial statements in terms of the operating performance
and financial position of a firm. It involves comparison for a meaningful interpretation of the financial
statements.

Efficiency ratios examine the ways in which various resources of the business are managed. The following ratios
consider some of the more important aspects of resource management:

i. Days' sales in Receivables (in Days)

This calculation shows the average number of days it takes to collect company’s accounts receivable (number of
days of sales in receivables).

365
Days' sales in Receivable s =
Recieveble turnover

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ii. Days' sales in Inventory (in Days)

A financial measure of a company's performance that gives investors an idea of how long it takes a company to
turn its inventory (including goods that are work in progress, if applicable) into sales. Generally, the lower
(shorter) the DSI the better.

365
Days' sales in Inventorie s =
Inventoryturnover

iii. Operating Cycle (in Days)

The net operating cycle involves determining how long it takes to create inventory, sell inventory and collection
of cash from customers.

Operating Cycle (in Days) = Days’ sales in A/R + Days’ sales in inventories

A. Liquidity Ratios
It measures the ability of the firm to meet its short-term obligations that is capacity of the firm to pay its current
liabilities as and when they fall due. Thus these ratios reflect the short-term financial solvency of a firm. A firm
should ensure that it does not suffer from lack of liquidity.

i. Current Ratio (C-assets against 1 Rs/- C-LBS)

The current ratio measures the short-term solvency of the firm. It establishes the relationship between current
assets and current liabilities. It is calculated by dividing current assets by current liabilities.

Current Assets
Current Ratio =
Current LBS

ii. Acid Test Ratio/Quick Ratio

It has been an important indicator of the firm’s liquidity position and is used as a complementary ratio to the
current ratio. It establishes the relationship between quick assets and current liabilities. It is calculated by
dividing quick assets by the current liabilities.

Current assets - inventory


Quick Ratio =
Current LBS
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iii. Cash Ratio (Cash in Rs against 1Rs/- C-LBS)

The ratio of a company's total cash and cash equivalents to its current liabilities. The cash ratio is most
commonly used as a measure of company liquidity. It can therefore determine if, and how quickly, the company
can repay its short-term debt.

Cash  Cash Equivalant


Current Ratio =
Current LBS

iv. Net working capital

Working capital
Net Workin g Capital =
Total assets
v. Interval measure

Current Assets
Interval measure =
Average daily operation

B. Profitability Ratios

Since a major goal of the company is to attain a high level of profitability, we would like to see a high value for
these ratios. We can relate the company’s profits to almost any item on the balance sheet or income statement
(e.g., net income to total assets, net income to common equity, net income to sales, etc.)

i. Gross Profit Margin

By definition, gross profit is equal to total sales minus cost of goods sold. Therefore, if the gross profit margin
declines, it is an indication that one of two things is likely happening:
 The cost of goods sold are increasing, and the company is not able to pass along the higher costs in
the form of price increases (possibly due to a highly competitive marketplace), or
 The company has reduced its prices, perhaps in an attempt to attract new customers and to increase its
market share.

Gross Profit
Gross Profit Margin =
Total Sales

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ii. Net Profit Margin

Whereas the gross profit margin measures the performance of the company’s operating managers, it doesn’t say
anything about the performance of the company’s financial managers. (Gross margin is affected only by the
decisions of operating managers with regard to pricing and cost control; it isn’t affected by decisions on how to
finance the company.) The net profit margin measures the combined performance of both the operating and
financial managers.

Earnings AfterTaxes
Net Profit Margin =
Total Sales

iii. Return on Assets

The primary purpose of investing in assets is to generate sales, which in turn lead to profits. The return on assets
ratio measures the profitability per Rs/- of investment in the firm. Notice that the ratio doesn’t say anything
about how the assets are financed, i.e., where the money comes from (either debt or equity). It simply wants to
know how profitable the company is per Rs/- invested in total assets (no matter where the money comes from to
finance those assets).

Earnings After Taxes


Return on Assets =
Total Assets

iv. Return on Equity

This ratio looks at the company’s profits from the standpoint of the company’s owners. It measures the
profitability per Rs/- of investment in the firm by the owners.

Earnings After Taxes


Return on Equity =
Total Equity

v. Operating Income Margin

Operating Income
Operating Income Margin =
Total Sales

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Balance sheet at Year ended 31st Dec
Table 1

Balance Sheet 2014 2015 2016

1. Property, plant and equipment 5,772,898 3,041,918,779 2,924,820,599


2.Long term investment 0 1,353,474,424 1,233,266,298
3.Loan to executive 3819 1384092 0
4.Long term deposites 50,707 8,732,521 8,732,521
A. Non-Current Assets 5,827,424 4,405,509,816 4,166,819,418

1. Store , spare and loose tools 1,137,030 186,838,001 173,180,729


2. Stock in trade 7,215,963 3,402,944,706 2,542,956,536
3.Trade Debt 5,415,608 1,343,003,773 1,318,915,400
4. loans and advances 574,559 74,898,764 632,943,147
5. other recieveables 1,000,862 54,139,312 81,157,583
6.Short term investments 497242 1673500693 1515059701
7. Taxrefunds due from government - 334,619,158 240,078,371
8. cash and bank balances 444,849 15,137,192 24,977,265
B. Current Assets 16,286,113 7,085,081,599 6,529,268,732
Total Assets (A+B) 22,113,537 11,490,591,415 10,696,088,150

1. Trade and other payable 2,445,831 1,013,025,288 895,955,581


2. Accured mark up 224,442 88,462,778 80,738,104
3. Short term borrowings 9,933,466 4,205,052,598 4,089,627,222
```````````4. Current maturity long term financing 810,797 317,583,186 284,644,202
5. Taxation 235,845 160,500,000 174,000,000
C. Current Liabilities 13,650,381 5,784,623,850 5,524,965,109

1.Long term financing 1,523,918 918,892,118 705,450,363


2.Deffered taxation 426889 115243874 0
3.Other non-current liabilities 87331 0 0
D. Non-Current Liabilities 2,038,138 1,034,135,992 705,450,363
total liabilities 15,688,519 6,818,759,842 6,230,415,472

Ordinary Shares 1,250,000 300,000,000 300,000,000


Preferred shares 600,000
1.Issued, Subscribed & Paid up capital 953,333 150,000,000 150,000,000
Capital Reserve 4,865,425 7,120,600 7,120,600
Unappropriated profit profit 4,514,710,973 4,308,552,078
E. Shareholders’ Equity 5,818,758 4,671,831,573 4,465,672,678
Total liabilities and Owner's equity 21,507,277 11,490,591,415 10,696,088,150

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Income Statement for Year ended 31st Dec
Table 2

Income Statement 2014 2015 2016

1.Sales 24,371,128 13,759,434,489 13,663,708,498

2.Cost of sales -20435316 -12814320855 -12,566,324,425

3.Gross Profit 3,935,812 945,113,634 1,097,384,073

i).Selling & distribution expenses -1,159,311 -423,000,944 -371,686,879


ii).Administrative and other expenses -443,232 -263,895,467 -251,464,007
5.Other income 0 609,442,986 325,061,526
6.other expenses -61,996 -12,642,593 -270,096,329

2,271,273 245,574,630 204,136,858

Profit from operations 2,271,273 855,017,616 529,198,384

Finance cost -1,142,456 -474,645,399 -416,356,102


1,128,817 380,372,217 112,842,282

Share of (loss)/ profit of associates 0 154,968,982 -110,208,126

Profit before taxation 1,128,817 535,341,199 2,634,156

Taxation -235,845 -161933131 -58793051

loss/profit after taxation 892,972 373,408,068 -56,158,895

other comprehensive income 0 0 0


Total comprehensive income 892,972 373,408,068 -56,158,895

(loss) / Earning per shares 26 24.84 -3.74

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Financial Statement Analysis
MTM’s Financial Statements Analysis

Ratios Analysis
Table 3

Particulars 2014 2015 2016


Current Ratio 1.19 1.22 1.18
Acid Test Ratio/Quick Ratio 0.664 0.636 0.721
Working Capital 2635732 1300457749 1004303623
Net Working Capital 11.919 11.317 9.389
Cash Ratio 0.032 0.0021 0.10
Interval Measure 5203.2 5448.6 5723.8
Debt Ratio 0.7094 0.59342 0.582494
Debt To Equity Ratio 2.69619 1.459554 1.3951796
Equity multiplier 3.80038 2.45954 2.39517
Long term debt ratio 0.20754 0.16436 0.13642
TIE 10.1196 9.6652 6.5545
Inventory turnover 2.83195 3.76565 4.9416
Day sale inventory 128.886 96.928 73.8624
ACP 24.35013 254.1486 168.360
Day sale receivable 14.989 1.43616 2.1679
NWC 9.2464 10.5804 13.60515
Fixed Assets Turnover 4.182144 3.123233 3.27916
Total Assets Turnover 1.10209 1.197 1.277
Profit Margin on sale 3.66405 2.7138 0.41100
ROA 0.04038 0.0324 0.00525
ROE 0.15 0.079 0.0125
Gross profit margin 16.14 6.868 8.031
Operating income margin 9.319 6.214 3.8730
EPS 14 11 15
PE Ratio 0.66 0.89 0.67

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Bench Mark Ratio
Table 4

Particulars 2014 2015 2016


Current Ratio 1.140 1.22 1.18
Acid Test Ratio/Quick Ratio 0.765 0.636 0.721
Working Capital 2379563432 1300457749 1004303623
Net Working Capital 10.8718 11.317 9.389
Cash Ratio 0.131 0.0021 0.10
Interval Measure 4244.7 5020.23 4842.57
Average daily operation 1961009 1834002.30 2391943.47
Debt Ratio 0.397942155 0.488 0.531
Debt To Equity Ratio 0.653 0.9545 1.133
Equity multiplier 1.64 1.9545 2.133
Long term debt ratio 0.14 0.2586 0.311
TIE 19.66 12.32 20.996
Inventory turnover 5.99 5.22 4.80
Day sale inventory 60.92 69.96 76.05
ACP 1874.67 159.720 135.54
Day sale receivable 0.194 2.285 2.692
NWC 10.678 16.57 12.120
Fixed Assets Turnover 1.8735 1.234 1.143
Total Assets Turnover 1.160 0.8300 0.7267
Profit Margin on sale 3.869 4.435 6.266
ROA 0.044 0.036 0.0455
ROE 0.0737 0.071 0.097
Gross profit margin 10.97 11.184 11.088
Operating income margin 7.815 7.925 11.292
EPS 49 51 72
PE Ratio 0.20 0.19 0.13

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INTERPRETATION:

1. Liquidity Ratio

Current Ratio:
Current ratio shows how much assets you have against current liability. MTM has 1.19 current assets in 2014
1.22 in 2015 and 1.18 in 2016 against every current liability of $1 current ratio is more than one that is good for
MTM. These ratios are more than the bench mark ratio that show MTM is more efficient.

Quick Ratio:
This ratio show that MTM has 0.66, 0.636, 0.72 of current assets to pay $1 liability in year 2014, 15, 16
respectively. This ratio is not good because quick ratio is less than 1 that is not good sign for MTM. This Ratio
is less than the average bench mark ratio that is 0.76, 0.67, 0.7545 in year 2014, 15, 16 respectively that show
MTM is less efficient than bench mark ratio.

Cash Ratio:
This ratio shows how much cash you have to pay off your current liability. MTM has 0.03, 0.0026, 0.0045 in
cash in 2014, 15, 16 respectively to pay off the $1 liability. MTM is less efficient because its cash ratio is less
than bench mark ratio that shows MTM is more liquidity.

Net Working capital to total assets:


This ratio shows how much % of our assets we use. MTM has 11.9, 11.31, 9.38 net working in year 2014, 15,
16 respectively. This ratio is more than the bench mark that why MTM is more efficient and company has more
operations, but on the other side MTM is not good because it uses less part or percentage of your assets.

Interval measures:
MTM interval measure is 5203 days in year 2014, 5448 days in 2015 and 5723 days in 2016 to convert the day
to day operation into current assets but benchmark has 4244 days in 2014, 5020, 4842 days in 2015 and 2016 to
convert the daily operations into the current assets. Moreover, its shows that MTM is not efficient or less
efficient because its industry ratio is less than MTM.

2.Long Term Solvency Ratio

Total Debt ratio:


This ratio show how much your company is financing by debt as compare to the assets. MTM has 0.709, 0.593,
0.582 debts against every $1 in assets in year 2014, 15, 16 respectively. MTM is not doing well and MTM has
less efficient because its industry average is less than MTM.

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Debt equity ratio:
MTM has 2.96, 1.45, 1.39 debt equity ratio in year 2014, 15 16. It is normally 1 and maximum debt to equity
ratio is 2, it also depends upon capital budgeting. Therefore, it is more efficient than its bench mark ratio.

Equity multiplier:
Equity multiplier of MTM is 3.800, 2.459, 2.39 in year 2014, 15, 16 respectively. This ratio is more than the
bench mark ratio that is good and its shows that MTM become more efficient.

Long-term debt ratio:


MTM long term debt ratio is 0.20, 0.164, 0.136 in year 2014, 15, 16 respectively, that is less than the bench
mark ratio that show MTM is efficient because its debt ratio is less than the bench mark ratio.

Time interest earned ratio:


This ratio shows how much time you pay your interest amount from your earning. MTM has 10.11, 9.666,
6.554 in year 2014, 15, 16 respectively. This ratio is more than bench mark ratio but in 2016 it is less than
bench mark ratio but overall the MTM is doing well.

3.Asset management turnover ratio:

Inventory turnover ratio:


This ratio shows in how much time a company convert its inventories into the sales. MTM has 2.83, 3.77, 4.94-
time covert its inventories into CGS in year 2014, 15, 16 respectively. MTM is managing its inventory
efficiently because its inventory turnover is less than the bench mark ratio that show we hold inventory and our
product demand is more than the bench mark company’s products.

Day’s sales in inventory:


This ratio shows in how much time product is sale. MTM has 128.8, 96.93, 73.86 days in years 2014, 15, 16
respectively to sale inventory. MTM day’s sale in inventory is more than the bench mark ratio.

Receivables turnover:
This ratio show how much receivable company generate in whole year by sale. MTM collected receivable is 24,
254, 168 times during the year 2014, 15, 16 respectively. MTM collect the receivable later than the bench mark
ratio in year 2015 & 2016.

Day’s sales in receivables:


MTM is working efficiently because they collect their payments earlier than its bench mark company.

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NWC turnover:
This ratio shows in how much time NWC convert into the sales. MTM has 9.24, 10.58, 13.60 time NWC
turnover that is more than the bench mark ratio but in MTM has more NWC turnover than bench mark turnover
that show first MTM is not performing well but in 2016 MTM doing good because it ratio is more than the
benchmark ratio.

Fixed assets turnover:


This ratio means how much company convert the fixed assets into the sale in particular time period. MTM has
4.18, 3.12, 3.27 times in sale in year 2014, 15, 16 respectively that shows MTM working efficiently for using
their fixed assets.

Total assets turnover:


This ratio means how much company convert the total assets into the sale in particular time period. MTM has
1.10, 1.19, 1.27 times in sale in year 2014, 15, 16 respectively that is more than the bench mark ratio that shows
MTM working efficiently for using their total assets and use the resources effectively.

4.Profitability ratios:

Profit margin:
MTM has 3.66, 2.71. 4.0 % on every sale in year 2014, 15, 16 respectively that shows MTM is not working
efficiently or performing well. So, net profit margin of MTM is less than benchmark.

Return on assets:
How much company earn against one assets. MTM ROA is 4.03, 3.24, 5.5 % in year 2014, 15, 16 respectively.
That shows MTM working efficiently than bench mark company.

Return on equity:
How much company earn against one assets. MTM ROE is 15.3, 7.99, 12 % in year 2014, 15, 16 respectively.
That shows MTM working efficiently than bench mark company because ROE of MTM is more than the bench
mark ratio.

5.Market value ratios:

Price- earnings ratio:


r & gamble shares sell for 22.19 times earnings. This ratio is greater than j& j, which means P&g, is working
efficiently.

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Conclusion:

its financial position, performance, and efficiency in operations. From the previous three years analysis shows
its overall assets have an increasing trend but not the liabilities. It has a little weak liquid position but has
performed well because there is a positive trend in its long term solvency ratio and assets turnover ratio overall.
From the data of 2015, MTM profit margin is less than its previous year’s performance. From the data of 2016,
MTM profit margin is greater than its previous year’s performance. That shows MTM is improving their
performance from its previous years. Moreover, at the whole by comparing both MTM and Sapphire, Sapphire
has less current liabilities than current assets but on the other side, MTM liabilities are greater than their current
assets. But MTM overall performing well and have strong position and positive trend.
I have put some of financial techniques on Masood Textile Mills Ltd [MTM]’s financial statements to checkout

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Vertical
Analysis

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EQUITY

Years MTM% SMT%


2014 27.05483358 60.50014627
2015 40.65788613 51.16160315
2016 41.75052239 46.86689718
2017 41.75052239 49.92272428
2018 41.75052239 46.52544942

INTERPRETATION:

It means that MTM is using more debt .And SMT is using less debts . MTM is more relaying on debts and less
on equity. And SMT is less relaying on debts and more on equity.SMT is performing well as compare to MTM.

Retained earning

Years MTM% SMT%


2014 3.664056912 3.869950873
2015 2.713832958 4.435430111
2016 0.449564677 6.2664589
2017 183.5262364 6.671748892
2018 183.5262364 57.33804012

INTERPRETATION;
Retained earnings of MTM is less as compare to SMT .it means that SMT earning more as compare to MTM.
Cost of goods sold and other expenses of SMT are less as compare to MTM. SMT earns more as compare to
MTM.

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Horizontal
Analysis
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Assets

Years MTM% SMT%


2015 51961.79795 128.3284133
2016 93.08561904 113.2187342
2017 115 100.1750592
2018 115 103.4749616

INTREPRETATION;
In horizontal analysis some companies select one year as bench mark for comparison and some companies take
each previous year as bench mark for comparison .i took each previous year as bench mark for comparison .

 2015 of MTM compare with 2014 and I find that assets grew by 5196107979 % from 2014 to2015.
 2016 of MTM compare with 2015 and I find that assets grew by 93.08561904% from 2015 to 2016.
 2017 of MTM compare with 2016 and i find that assets grew by 115% from 2016 to 2017.
 2018 of MTM compare with 2017 and I find that assets grew by 115% from 2017 to 2018.

 2015 of SMT compare with 2014 and I find that assets grew by 128.3284133% from 2014 to2015.
 2016 of SMT compare with 2015 and I find that assets grew by 113.2187342% from 2015 to 2016.
 2017 of SMT compare with 2016 and I find that assets grew by 100.1750592% from 2016 to 2017.
 2018 of SMT compare with 2017 and I find that assets grew by 103.4749616% from 2017 to 2018.

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Conclusion:

Sometimes it can be difficult to interpret in a meaningful way all the dollar amounts of presented in a set of
financial statements. For example if one company has liabilities of $10,000 and another company has liabilities
of $10,000,000 is first company less risky? Maybe or not it depends in part on the size of company (how much
in assets does each company have)and company’s industry.
A useful way to analyze financial statements is to perform either a horizontal or a vertical analysis of
statements. These types of analysis help a financial statement reader compare companies of different sizes.
The horizontal and vertical analysis approaches are similar in that dollar amounts reported are converted to
percentages. However approaches differ in the base used to compute the percentage.
Horizontal analysis focus on trends and changes in financial statement item over time.
Vertical analysis sometimes is reffered to as common size analysis .

By performing both analysis vertical and horizontal I find that SMT is performing well as compare to MTM .

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