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SURAJ COTTON MILLS LIMITED
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Annual Reports 2014-2016
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23-4-18

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Amna Ameen Farooqui Roll no 703
BBA A Morning

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Contents
Company Profile ............................................................................................................................. 3
Our vission: ..................................................................................................................................... 4
Our mission: .................................................................................................................................... 4
Our strengths: ................................................................................................................................. 4
Our strategy: ................................................................................................................................... 4
Our values: ...................................................................................................................................... 4
Liquidity ratio ................................................................................................................................... 5
Current Ratio: .............................................................................................................................. 5
Quick Ratio: ................................................................................................................................. 5
Assets management ratios ............................................................................................................ 6
Inventory Turnover Ratio:........................................................................................................... 6
Days sales outstanding: ............................................................................................................. 6
Fixed assets Turnover Ratio: ..................................................................................................... 6
Total Asset Turnover Ratio ........................................................................................................ 7
Debt Management Ratios .............................................................................................................. 7
Debt Ratio:................................................................................................................................... 7
Time interest earned Ratio: ........................................................................................................ 8
Profitability ratio .............................................................................................................................. 8
Operating margin Ratio: ............................................................................................................. 8
Profit margin Ratio: ..................................................................................................................... 9
Return on total assets: ............................................................................................................... 9
Basic earned power Ratio: ......................................................................................................... 9
Return on common equity: ........................................................................................................ 10
Market value ratio .......................................................................................................................... 10
Price /Earning Ratio:.................................................................................................................. 10
Book value per Ratio: ................................................................................................................ 10
Book / market Ratio: ................................................................................................................... 11
Trend analysis ................................................................................................................................. 11
Operation ..................................................................................................................................... 11
Profitability ................................................................................................................................... 11
Liquidity and debt management ............................................................................................... 12
Market value ratios .................................................................................................................... 12
DuPont Analysis ............................................................................................................................ 12

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 SURAJ COTTON MILLS LIMITED

Company Profile
Suraj Cotton Mills Limited is a company that specialises and comprises of state-of-
the-art spinning and air jet weaving machinery. Established as a Public Limited
Company on December 18, 1984, the Company now has four operating units located
at Nooriabad (Sindh), Shahkot and Raiwind (Punjab).

The Company initially set up its spinning project with the capacity of 16,320 spindles
at Nooriabad in 1985, which came into commercial production in 1986.

In order for the company to be able to absorb the increasing competitiveness, and to
able to produce a variety of fabrics, the management has expanded its weaving
facilities by addition of 120 state of art, wider width Air Jet looms in 2003 which has
further enhanced the collective capacity to 28 million meters of Grey cloth annually.

Suraj Cotton Mills Limited enjoys a sound market reputation as being a

manfucatuere of high-quality yarn and fabric in both the domestic as well as
international markets. The company has developed a long-
term relationship with its customers and attributes its success to a valued
relationship with suppliers, ginners, cotton spinners and is maintaining focus on
increasing and enhancing investor values.
Our name is synonymous with quality, service and competitiveness. Our motto is
simple: Producing supreme quality product at a reasonable rate. In order to do so,
we have adopted the following techniques:

•TQM: Assurance of endless improvement

•JIT: Time efficiency and cost reduction

We believe in having an on-going relationship with our valued customers. To ensure

this, we have trained professionals that handle everything from the uncompromising
quality of our fabric, to shipping timely consignments and entertaining customer

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inquiries promptly. At Suraj Cotton Mills, we meet our goals by helping our
customers meet theirs.

Our vission:
We are committed to becoming market leaders and premier textile manufactures in
the industry by supplying fabric that merits quality.

Our mission:
We are committed to becoming the premier manufacturing organization in the textile
industry maintaining market leadership in the present business and diversifying into
value added projects with the object of maximizing returns for all the stakeholders.

Our strengths:
We have made pioneering efforts in development of new products which has
enabled us to emerge as a market leader. This together with an innovative and
professional management style has helped us to build a strong and financially sound
base.

Our strategy:
We are determined to convert our vision into reality by using innovation to create a market
niche for our products and by investing in facilities, people, systems and new technology,
diversification into value addition and improvements in productivity and service to customers.
We shall aggressively exploit new markets by drawing strength from our corporate image
and by promoting a culture that encourages initiatives at all levels of decision making.

Our values:
• We take pride in adhering to ethical business practices and in being a good
corporate citizen.
• We respect our people and endeavour to provide them opportunities to realize their
full potential.
• We recognize our responsibility to our stakeholders and society.

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 SURAJ COTTON MILLS LIMITED
Below we have ratio analysis of Suraj Cotton Mills Limited for the years 2014-2015
and 2016.

Liquidity ratio

Current Ratio:

Current Ratio = Current assets = 4216759 = 2.89

(2016) Current liabilities 1460986

Current Ratio = Current assets = 3922248 = 3.26

(2015) Current liabilities 1204708

Current Ratio = Current assets = 3444756 = 3.04

(2014) Current liabilities 1132020

Analysis:
The current ratio of the company has decreased in 2016 as compared to 2014 and
2015. The current ratio of the company shows that liquidity position of the company is
now bad because it has reduced capacity to generate cash required for paying short
term obligations. The Company wants to increase its current assets.

Quick Ratio:

Quick Ratio = Current assets-Inventory = 3228423 = 2.20

(2016) Current liabilities 1,460,986

Quick Ratio = Current assets-Inventory = 2989089 = 2.48

(2015) Current liabilities 1,204,708

Quick Ratio = Current assets-Inventory = 2060432 = 1.9

(2014) Current liabilities 1,132,020

Analysis:
The Quick ratio of the company has remained constant during 2014, 2015
and 2016 which is a good indicator that the company is experiencing constant revenue
growth, collecting its accounts receivable and turning them into cash quickly and likely
turning over its inventories quickly.

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Assets management ratios

Inventory Turnover Ratio:

Inventory Turnover Ratio = sales = 7,041,161 = 677.10times

(2016) Inventory 11,391

Inventory Turnover Ratio = sales = 7,664,263 = 739.20 times

(2015) Inventory 11,583

Inventory Turnover Ratio = sales = 8,808,650 = 760.48 times

(2014) Inventory 11,583

Analysis:
The Inventory Turnover Ratio of the company is declining as compared to
2014 and 2015 so now company is less quickly converting its inventory into sales.The
main cause that seems to result in decrease in inventory turnover ratio is the decrease
in total sales of the company in year 2016. As a result a large inventory has to be
stored and its maintenance cost is to be check by the company.

Days sales outstanding:

Days sales outstanding = receivable = 17402 = 0.82

(2016) annual sales/365 7,712,885/365

Days sales outstanding = receivable = 7021 = 0.2993

(2015) annual sales/365 8,562,185/365

Days sales outstanding = receivable = 5435 = 0.1998

(2014) annual sales/365 9,924,609/365

Analysis:
The days sales outstanding ratio of the company has increased in 2016 compared to
2014 and 2015 meaning that now the company is selling more products to its
customers on credit and taking a longer time to collect the money. This may lead to
cash flow problems because of the long duration between the time of a sale and the
time the company receives payment.

Fixed assets Turnover Ratio:

Fixed assets Turnover Ratio = sales = 7712885 = 0.55

(2016) net fixed assets 2587203
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Fixed assets Turnover Ratio = sales = 8562185 =0.84
(2015) net fixed assets 2091070

Fixed assets Turnover Ratio = sales = 9924609 = 0.81

(2014) net fixed assets 2103472

Analysis:
The fixed asset turnover ratio of the company has decreased compared to 2014 and 2015
which indicates inefficient or under utilization of its fixed assets because of low sales
in year 2016.

Total Asset Turnover Ratio

Total Asset Turnover Ratio = Sales = 7712885 =18.14 times

(2016) Avg Total Assets 425247.625

Total Asset Turnover Ratio = Sales = 8562185 = 22.78 times

(2015) Avg Total Assets 375832.375

Total Asset Turnover Ratio = Sales = 9924609 = 28.62 times

(2014) Avg Total Assets 346764.25

Analysis:
The total asset turnover ratio of the company is decreasing continuously from the
years 2014 to 2016 that indicates that the company is not efficiently using its assets
to generate sales. For improvement in the ratio the company needs to increase its
sales or limit the purchase of inventory.

Debt Management Ratios

Debt Ratio:

Debt Ratio = Total Debt = 1949140 = 0.29

(2016) Total assets 6803962

Debt Ratio = Total Debt = 1509340 = 0.25

(2015) Total assets 6013318

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Debt Ratio = Total Debt = 1599727 = 0.29
(2014) Total assets 5548228

Analysis:
The total debt ratio of the company has increased in 2016 compared to 2015
and maintained it constant to 2014 that shows the company is in good position. It is
less relying on others in comparison and facing low pressures of creditors.

Time interest earned Ratio:

Time interest earned ratio = EBIT = 671724 = 10.82

(2016) interest charges 62090

Time interest earned ratio = EBIT = 897922 = 13.92

(2015) interest charges 64518

Time interest earned ratio = EBIT = 1115959 = 13.30

(2014) interest charges 83924

Analysis:
The time interest earned ratio of the company has decreased in 2016 compared to
2014 and 2015 meaning few earnings are now available to meet the interest
payments and low debt capacity.

Profitability ratio

Operating margin Ratio:

Operating margin Ratio = EBIT = 671724 = 0.087

(2016) sales 7712885

Operating margin Ratio = EBIT = 897922 = 0.1048

(2015) sales 8562185

Operating margin Ratio = EBIT = 1115959 = 0.11

(2014) sales 9924609

Analysis:
The operating margin ratio of the company has decreased in 2016 compared to 2015
and 2014 because of the low sales and revenue generated in 2016.
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Profit margin Ratio:

Profit Margin = net income = 425218 = 0.06

(2016) Sales 7712885

Profit Margin = net income = 591491 = 0.07

(2015) Sales 8562185

Profit Margin = net income = 652462 = 0.07

(2014) Sales 9924609

Analysis:
The profit margin ratio of the company has a very small decrease of 0.1 points in 2016
compared to 2014 and 2015. The company is still getting profit on slight low scale
meaning the company is working efficiently.

Return on total assets:

ROA Ratio = net income = 425218 = 0.063

(2016) Total assets 6803962

ROA Ratio = net income = 591491 = 0.98

(2015) Total assets 6013318

ROA Ratio = net income = 652462 = 0.117

(2014) Total assets 5548228

Analysis:
The return on total assets ratio has decreased in 2016 as compared to 2014 and 2015
which is less favourable for the investors because it shows that the company is not
effectively working on its assets to produce greater amount of net income.

Basic earned power Ratio:

BEP Ratio = EBIT = 671724 = 0.098

(2016) total assets 6803962

BEP Ratio = EBIT = 897922 = 0.15

(2015) total assets 6013318

BEP Ratio = EBIT = 1115959 = 0.20

(2014) total assets 5548228

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Analysis:
The BEP ratio is decreased in 2016 compared to other years that shows the poor
ability of the company to generate enough net income compared to 2015 and 2014.

Return on common equity:

ROA Ratio = net income = 425218 = 0.087

(2016) common equity 4854822

ROA Ratio = net income = 591491 = 0.131

(2015) common equity 4503050

ROA Ratio = net income = 652462 = 0.61

(2014) common equity 3947341

Analysis:
The Return on Assets of the company has decreased in 2016 as compared
to 2015 that shows that in 2016 the company generated less profits from its
shareholders investment in the company.

Market value ratio

Price /Earning Ratio:

(P/E) Ratio = price per share = 11.97 = 0.74

(2014) earning per share 16

(P/E) Ratio = price per share = 11.97 = 0.544

(2015) earning per share 22

(P/E) Ratio = price per share = 11.97 = 0.39

(2016) earning per share 30

Book value per Ratio:

Book value Ratio = common equity = 4854822 = 18.42

(2014) share outstanding 263538

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Book value Ratio = common equity = 4503050 = 18.79
(2015) share outstanding 239580

Book value Ratio = common equity = 3947341 = 18.12

(2016) share outstanding 217800
Book / market Ratio:

(M/B) Ratio = market price per share = 155 = 8.41

(2014) book value per share 18.42

(M/B) Ratio = market price per share = 155 = 8.24

(2015) book value per share 18.79

(M/B) Ratio = market price per share = 155 = 8.55

(2016) book value per share 18.12

Analysis:
The market /book ratio had remained almost constant during 2014-2016 So it shows
company has a competitive stability in the market.

SURAJ COTTON MILLS LIMITED

Trend analysis

The Suraj cotton mill is a good and well established company in a way it is not
bearing any loss or under debts pressure. However, comparing the last two years,
the profit ratio of Suraj cotton mills seems to be decreasing from two last years. The
operating cost of company in last year was 7,664,263 and in 2016 it is 7,041,16, it
was decreasing from past cost. The turnover ratio was also increase.

Operation
The operational performance predicts that revenue and net income was continuously
decreasing. The general administration expense was higher and EBIT was also
decreased.

Profitability
The profitability ratio ROA & profit margin have decreased slightly.

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 Liquidity and debt management
The debt ratio had increased and current ratio was decreased to a small extent.

Market value ratios

The earnings per share was decreased from 22 to 16.The book value and market
ratio remained almost constant that shows competitive stability in the market.

DuPont Analysis

THE DUPONT ANALYSIS

Profit Margin= Total Assets Equity Multiplier = Years ROE Return on

Turnover = Equity
NetIncome/Sales Sales/Total Assets Total
Assets/CommonEquity
5.51% 1.13times 1.40times 2016 0.09%
7% 1.42times 0.26times 2015 0.03%
6.57% 1.78times 0.28times 2014 0.03%

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