Final Project

Introduction Business Finance

Submitted by – M.Abdullah 190024

Ashar Javed 190159

Usama Khalid 190039

Class – BSAF – 3

Submitted to – Sir Shoaib Ali

1
Contents
Introduction..........................................................................................................................................5
Mission statement.................................................................................................................................5
The way we collected data....................................................................................................................5
Balance sheet........................................................................................................................................6
Income interest.....................................................................................................................................8
Cash flow statement............................................................................................................................10
Ratio Analysis.....................................................................................................................................12
Liquidity Ratios....................................................................................................................................13
Current ratio....................................................................................................................................13
Quick ratio...........................................................................................................................................13
Cash ratio.............................................................................................................................................13
Graph...................................................................................................................................................14
Interpretation..................................................................................................................................14
Current ratio ;..................................................................................................................................14
Quick ratio...........................................................................................................................................14
Cash ratio.............................................................................................................................................14
Activity Ratio.......................................................................................................................................15
Inventory turnover ratio......................................................................................................................16
INVENTORY TURN-OVER IN DAYS........................................................................................................16
AVERAGE COLLECTION PERIOD (in days).........................................................................................16
Average payment period.....................................................................................................................16
Cash conversion cycle..........................................................................................................................17
Total asset turnover............................................................................................................................17
Fixed asset turnover............................................................................................................................17
Graph...................................................................................................................................................18
.............................................................................................................................................................18
Interpretation......................................................................................................................................19
Inventory turnover ratio......................................................................................................................19
Inventory turnover ratio in days..........................................................................................................19
Average collection period....................................................................................................................19
Cash conversion cycle..........................................................................................................................19
Fixed asset turnover ratio....................................................................................................................19
Total asset turnover............................................................................................................................19
Average payment period.....................................................................................................................19
Profitability Ratio.................................................................................................................................20
2
Gross profit margin..............................................................................................................................21
Operating profit margin.......................................................................................................................21
Net profit margin.................................................................................................................................21
Return on asset...................................................................................................................................21
Return on equity..............................................................................................................................22
Earnings per share...............................................................................................................................22
Dividend per share..........................................................................................................................22
Graph...............................................................................................................................................23
Interpretation......................................................................................................................................24
Gross profit margin..............................................................................................................................24
Operating profit margins.....................................................................................................................24
Net profit margin.................................................................................................................................24
Return on asset...................................................................................................................................24
Return on equity..................................................................................................................................24
Earnings per share...............................................................................................................................24
Dividend per share..............................................................................................................................24
Market Ratio........................................................................................................................................25
Price earnings ratio..............................................................................................................................26
Market Value ratio...............................................................................................................................26
Graph..................................................................................................................................................26
Interpretation.....................................................................................................................................27
• Price earnings ratio.....................................................................................................................27
• Market/book value rate.............................................................................................................27
Debt Ratio...........................................................................................................................................28
Debt to equity ratio.............................................................................................................................29
Interest coverage ratio.......................................................................................................................29
Financial leverage multiplier..............................................................................................................29
Debt Ratio...........................................................................................................................................29
Graph...................................................................................................................................................30
Interpretation.....................................................................................................................................31
Interest coverage ratio...................................................................................................................31
Debt to equity ratio.........................................................................................................................31
Financial leverage Multiplier..............................................................................................................31
Finished Good turnover in days..........................................................................................................31
Interpretation.....................................................................................................................................32
Account payable turnover in days......................................................................................................32
3
Interpretation.....................................................................................................................................32
Long term debt Capitalization............................................................................................................33
Interpretation.....................................................................................................................................33
Cash flow coverage.............................................................................................................................34
Interpretation......................................................................................................................................34
.................................................................................................................Error! Bookmark not defined.
Horizontal analysis of balance sheet..................................................................................................35
Vertical analysis of balance sheet......................................................................................................36
Horizontal analysis of income statement...........................................................................................37
Vertical analysis of income statement...................................................Error! Bookmark not defined.
Summary of the ratios.........................................................................................................................38
References...........................................................................................................................................38

4
Introduction

Engro Foods Limited (EFL) being the 2nd largest dairy company of Pakistan was established

in 2005 with a view to cater the local needs with products in conformity with the global food

safety standard. In December 2016, it became subsidiary of the world 6 th largest dairy

cooperative in the world when Friesland Campina acquired 51% of its shareholding.

Mission statement

Safer, healthier, happier, more prosperous lives for Pakistanis.

The way we collected data

 Income statement

 Balance sheets

 Ratio analysis

 Excel sheet and formulas.

5
 As all these data that we have collected reflects the company way of dealing from 2015 to

2019 and how they have worked to stabiles the company through different ratios.

Balance sheet
The amount is in millions 2019 2018 2017 2016 2015

Cash and Short Term

65.92 100.67 68.47 702.94 650.92
Investments
Cash 65.92 100.67 68.47 702.94 209.80
Cash & Equivalents - - - - -
Short Term Investments - - - - -
Total Receivables, Net 6020.99 5540.21 4896.07 4959.93 4500.68
Accounts Receivables - 84.65
915.73 400.31 170.64 69.65
Trade, Net
Total Inventory 4232.78 3641.13 3386.42 4605.29 4700.36
Prepaid Expenses 257.38 32.98 30.81 33.35 36.96
Other Current Assets, Total 13.49 262.54 149.96 165.84 175.36
Total Current Assets 10590.55 9577.52 8531.72 10467.36 12009.67

Total Assets 23566.1 22768.47 22218.33 24713.77 26442.43

Property/Plant/Equipment,
12647.14 13027.55 13528.18 14053.42 15963.2
Total - Net
Property/Plant/Equipment
27294.01 25904.17 24847.75 24108.59 25006.3
, Total - Gross
Accumulated
-14646.88 -12876.63 -11461.78 -10209.08 -12469.03
Depreciation, Total
Goodwill, Net - - - - -

Intangibles, Net 95.14 92.42 71.64 44.38 55.63

Long Term Investments - - - - -

Note Receivable - Long
- 70.72 83.63 93.98 97.83
Term
Other Long Term Assets,
233.27 70.98 3.17 54.63 49.62
Total
Other Assets, Total - - - - -

6
 The amount is in
2019 2018 2017 2016 2015
millions
Total Long-Term Debt 3613.75 4000 4121.34 500.23 2536.2
Long Term Debt 3200 4000 4000 500 450
Capital Lease
413.75 - 121.34 - -
Obligations
Deferred Income Tax - 616.41 1287.31 1605.82 1782.3
Minority Interest - - - - -
Other Liabilities, Total - - - - -

The amount is in
2019 2018 2017 2016 2015
millions

Total Equity 8384.67 9341.06 9721.02 17150.52 13254.3

Total Liabilities &

23566.1 22768.47 22218.33 24713.77 26001.33
Shareholders' Equity
Total Common
766.6 766.6 766.6 766.6 766.6
Shares Outstanding
Total Preferred
- - - - -
Shares Outstanding

Income interest
The value is in
millions 2019 2018 2017 2016 2015
Total Revenue 38857.34 32439.45 34653.49 43878.35 46889.36
Revenue 38857.34 32439.45 34653.49 43878.35
45987.6

7
 Other Revenue, Total - - - - -
Cost of Revenue,
Total 33693.35 27265.63 29021.22 33775.62 35678.3
Gross Profit 5163.99 5173.82 5632.26 10102.73 12012.69
Total Operating
Expenses 38736.12 31934.43 33566.01 40012.52 42232.6

6633.2
Selling/General/Admin. -
4786.02 4924.51 4550.65 5903.46
Expenses, Total
Research & Development 0.09 2.04 - - 289.3
Depreciation / Amortization 418.12 227.94 231.15 271.02
Interest Expense (Income) - Net 277
-41.23 -1.69 -10.9 -16.2
Operating
56.36
Unusual Expense (Income) -257.36 -380.82 -251.86 50.22
Other Operating Expenses, Total 137.13 -103.17 25.75 28.41 30.26
Operating Income 121.22 505.02 1087.47 3865.82 4200.36
Interest Income
(Expense), Net
Non-Operating -1203.89 -660.18 -505.34 -319.66 -423.3
Gain (Loss) on Sale
of Assets - - - - -
Other, Net -17.68 -15.16 -19.15 -28.38 -36.34
Net Income Before
Taxes -1100.36 -170.32 562.98 3517.79 3698.52
Provision for
Income Taxes -145.49 -234.1 183.68 1131.07 1136.07
Net Income After
Taxes -954.87 63.78 379.3 2386.71 2983.32
Minority Interest - - - - -
Equity in Affiliates - - - - -
U.S GAAP
Adjustment - - - - -
Net Income Before
Extraordinary
Items -954.87 63.78 379.3 2386.71 2563.3
Total
Extraordinary
Items - - - - -
Net Income -954.87 63.78 379.3 2386.71 2598.6
Total Adjustments - - - - -
8
 to Net Income
Income Available
to Common
Excluding
Extraordinary
Items -954.87 63.78 379.3 2386.71 2980.65
Dilution
Adjustment - - - - -
Diluted Net Income -954.87 63.78 379.3 2386.71 2546.32
Diluted Weighted
Average Shares 766.6 766.6 766.6 766.6 790.32
Diluted EPS
Excluding
Extraordinary
Items -1.25 0.08 0.49 3.11 5.32
DPS - Common
Stock Primary
Issue - - 0.4 10 11.2
Diluted Normalized
EPS -1.46 -0.24 0.27 3.25 4.20

Cash flow statement

2019 2018 2017 2016
The value is in millions 2015
12 12 12
Period Length: Months 12 Months 12 Months Months months
Net Income/Starting Line -1100.36 -170.32 562.98 3517.79 3698.3
Cash from Operating
Activities 1522.06 1230.81 4515.67 5121.51 6542.63

Depreciation/Depletion 2241.78 1919.12 1890.78 1929.82

Amortization 28.55 26.86 27.63 27.45 2000.36
Deferred Taxes - - - -
29.63
Non-Cash Items 1209.79 401.96 440.76 584.02
Cash Receipts - - - - -
Cash Payments - - - -
600.23
Cash Taxes Paid 658.02 798.02 851.72 1152.07
Cash Interest Paid 990.08 597.12 458.32 422.39 -

Changes in Working Capital -857.72 -946.81 1593.52 -937.57 1325.6

9
 495.36

-950.63
Cash from Investing
Activities -838.38 -1112.82 -900.65 -1188.1 -1200.36

Capital Expenditures -1158.09 -1340.31 -1180.78 -1385.84 1400.36

Other Investing Cash Flow
319.71 227.49 280.12 197.74
Items, Total 200.69
Cash from Financing
Activities -458.06 -958.11 -5393.27 -3175.88 -3200.69

-
Financing Cash Flow Items - - - -
Total Cash Dividends Paid -0.62 -306.31 -7656.94 - 5236.3
Issuance (Retirement) of
- - - -
Stock, Net -
Issuance (Retirement) of
-457.44 -651.79 2263.66 -3175.88
Debt, Net 3300.36
Foreign Exchange
Effects - - 4.7 1 2.36
Net Change in Cash 225.62 -840.12 -1773.56 758.53 790.63
Beginning Cash
Balance -159.7 940.79 1842.03 - -
Ending Cash Balance 65.92 100.67 68.47 - -
Free Cash Flow 363.97 -109.5 3334.89 - -
Free Cash Flow Growth - - - - -
Free Cash Flow Yield - - - - -

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 Ratio Analysis

LIQUIDITY
RATIOS   2015 2016 2017 2018 2019

current
CURRENT assets/current 1.91800169 1.20357472 1.08699703
RATIO liabilities 2.00070218 7 9 4 0.9155293

liquid
assets/current 1.11838751 0.84385690 0.72585047 0.3659080
QUICK RATIO liabilities 1 7 9 0.67370409 1

(cash cash
equvilants)/curren 0.70168508 0.64873527 0.5496054
CASH RATIO t liabilities 1.22268617 1.0668135 8 3 6

11
 3.82867210 2.63111029 2.40943639 1.8310427
TOTAL   1.22268617 4 6 7 8

Liquidity Ratios

Current ratio
2015 = 11254.63/5625.34 = 2.00070218

2016 = =10467.36/5457.43 = 1.918001697

2017 =8531.72/7088.65=1.203574729

2018 =9577.52/8810.99 = 1.086997034

2019 =10590.55/11567.68 = 0.9155293

Quick ratio
2015 =11254.63-4963.32/5625.34 =1.118387511

2016 =10467.36-4605.29/5457.43=0.843856907

2017 =8531.72-3386.42/7088.65= 0.725850479

2018 =9577.52-3641/8810=0.67370409

2019=10590.55-4232.78/11567.68= 0.36590801

Cash ratio
2015 =11254.63-50.65-4325.6/5625.63=1.22268617

2016=10497-69.65-4605.29/5457.43=1.0668135

2017=8531.72-170.67-3386.42/7088.65=0.701685088

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 2018=9577.53-400.31-3461.19/8810.99=0.648735273

2019=10590.55-4232.78-915.73/11597.68= 0.54960546

Liquidity Ratio
8

0
1 2 3

2015 2016 2017 2018 2019

Graph
Interpretation

Current ratio ;
The company is showing huge short-term debates and payables through which it has been see
decreasing in current ratio. Also, the current assets are decreasing which shows the current ratio
decreasing

Quick ratio
As we can see that throughout the company is indicating a decrease in quick ratio as the company is
struggling to grow sales and is paying bills and the receivables are slow through which the company
is struggling

Cash ratio

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 As we can that the company has less than 1 ratio which indicates that a company is at risk. it also
shows there is increase in short term debt and decrease in current assets.

Activity Ratio

Activity ratio shows the numbers of times of assets employed or any constitution of
assets turned into sale during an accounting period.

• Average collection period = accounts receivable / average sales

• Inventory turnover = cost of goods sold \ average inventory
• Average payment period = accounts payable / average purchasing
• Fixed asset turnover = total sales \ fixed assets
• Total assets turnover = total sales \total assets
• Cash conversation cycle = inventory +account receivable – account payable
• Interest ratio = EBIT \ interest expense
• Inventory turnover in days = 365 / inventory turnover

ACTIVITY
RATIOS    2015 2016  2017   2018 2019 

INVENTORY
TURN-OVER 1217.62036 1086.43342 15919.6895 20290.4425
RATIO COGS/inventory 6 8 2 3 19130.814
INVENTORY
TURN-OVER 0.07553260 0.02292857 0.01798876 0.0190791
IN DAYS 365/inventory turn-over 8 0.33596168 6 5 7
AVERAGE
COLLECTION account
PERIOD (in receivables/average 0.00031356 0.00044304 0.00132697 0.00233324 0.0040533
days) sales per day 7 4 7 4 4
AVERAGE account
PAYMENT payables/average 0.29060783 0.29310857 0.96587251 1.21048410 1.4287418
PERIOD purchasing per day 8 7 4 8 7
CASH inventory account
CONVERSION receivables-account
CYCLE payables 3547.04 3324.8 286.21 -366.09 -899.04
TOTAL
ASSETS 1.72339678 6.36115007 5.78769871 7.53533285 9.5866520
TURN-OVER sales/total assets 5 9 5 3 1

FIXED ASSETS 11.9252913 11.1864585 13.1696289 17.863327

TURN-OVER sales/fixed assets 2 3 9.50556542 8 2

14
 4766.75021 16222.1829 18260.675
Total   7 4429.41055 2 19946.2883 9

Inventory turnover ratio

2015 =5957025/4892.35=1217.620366

2016=5003341/4605.29=1086.433428

2017==53910755/3386.42=15919.68952

2018=73880139/3641.13=20290.44253

2019=80976527/4232.78=19130.814

INVENTORY TURN-OVER IN DAYS

2015 =365/4832.35=0.075532608

2016 =365/1086.433428=0.33596168

2017 =365/15919=0.022928576

2018 =365/20290.4425=0.017988765

2019 =365/19130.814=0.01907917

AVERAGE COLLECTION PERIOD (in days)

2015 =56.96/181652/365 =0.000313567

2016 =69.65/157208/365=0.000443044

2017 =170.64/128593/365=0.001326977

2018 =400.31/171568/365=0.002333244

2019 =915.73/225920/365=0.00405334

Average payment period

2015 =1402.27/4825.3=0.290607838

2016 =1349.85/4605.29=0.293108577

2017 =3270.85/3386.42=0.965872514

15
2018 =4407.53/3641.13=1.210484108

2019 =6047.55/4232.78=1.42874187

Cash conversion cycle

2015 =4892.35+56.96-1402.27=3547.04

2016 =4605+69.65-1349.85=3324.8

2017 =170.64+3386.42-3270.85=286.21

2018 =400.31+3641.13-4407.53=-366.09

2019 =225920/23566.1=-899.04

Total asset turnover

2015 =181615/105382=1.723396785

2016 =157208/24713.77=6.361150079

2017 =128593/22218.33=5.787698715

2018 =171568/22768.47=7.535332853

2019 =225920/23566.1=9.58665201

Fixed asset turnover

2015 =181652/15232.5=11.92529132

2016 =157208/14053.42=11.18645853

2017 =128593/13528.18=9.50556542

2018 =171568/13027.55=13.16962898

2019 =225920/12647.14=17.8633272

16
Graph

Activity ratio
25000

20000

15000

10000

5000

0
2015 2016 2017 2018 2019

inventory turnover ratio inventory turnover in days average collection period

cash conversion cycle fixed asset turnover total asset turnover
average payment period

Interpretation

17
Inventory turnover ratio
High turnover ratio indicates there maybe the company has inadequate inventory level which may
result in decrease in sales also high inventory level can be a good sign but mostly it is taken as a bad
sign due to more inventory and less sales.

Inventory turnover ratio in days

It holding its inventory longer as it has high which shows that the company has less sales thus having
high inventory turnover in days

Average collection period

The average period is being increase every year which shows the company needs better
communication regarding their debts and your expectation of payments

Cash conversion cycle

Cash conversion cycle is decreasing every year as we can that people tend to be in pay in debts thus
the cash conversion cycle is decreasing

Fixed asset turnover ratio

As we can see the fixed asset are increasing till 2016 which means that the firms are effectively using
its asset to generate but in 2017 to 2019, we see a decrease which means that the firm does not use
it assets effectively to generate revenue

Total asset turnover

As we can see the same in that from 2016 to 2017 there was decrease in the ratio thus meaning that
company was not using its asset to generate revenue but then from 2018 to 2019 the ratio is high
which means that company was using its asset to generate revenue

Average payment period

The ratio indicates that the company has still to pay to its vendors and it getting high every year
which shows that the company has cash which is a good sign and also through that cash they can
buy assets and maintain the cash flow

Profitability Ratio

18
 The profitability or financial performance is summarized in income
statement. Profitability ratio is calculated to analyse the earing capacity of business which is
outcome of utilization of resources employed in the business. The various ratios which
commonly used are:

Gross profit margin = gross profit \sales *100

Operating profit margin = operating profit \sales *100
Net profit margin = net profit \sales *100
Return on equity = net profit \shareholder equity *100
Dividend per share = total liabilities\ total assets*100
Return on asset = net income / total asset * 100
Earnings per share = net income / number of share common stock

PROFITABILIT
Y RATIOS    2015 2016  2017 2018  2019 

(gross
GROSS PROFIT profit/sales)
MARGIN *100 6% 23% 4% 19% 2%

(operating
OPERATING profit/sales)
PROFIT MARGIN *100 2% 2% 1% 0% 0%

NET PROFIT (net profit or

MARGIN loss/sales) *100 1% 2% 0% 0% 0%

(net
RETURN ON income/total
ASSET assets) *100 2% 2% 17% 0% -4%

(net
RETURN ON income/total
EQUITY equity) *100 14% 14% 4% 1% -11%

net income/no. -
EARNING PER of share of 0.46009893 0.31133869 0.04947847 0.00831989 0.124559
SHARE common stock 1 7 4 7 7

dividend/no of -
DIVIDENT PER share of 1.29929584 0.16571310 0.001904
SHARE common stock 8 1.13399496 1 0.12360748 5

TOTAL   202% 187% 48% 33% -27%

Gross profit margin

2015 =11234.58/181652 *100=6%

19
2016=10102.73/44346*100=23%

2017=5632/128593*100=4%

2018=31934.43/171568*100=19%

2019=38736.12/2259320*100=2%

Operating profit margin

2015=4256.23/181652*100=2%

2016=3865.82/157208*100=2%

2017=1087.47/128593*100=0%

2018=505.02/171568*100=1%

2019=121.22/225920*100=0%

Net profit margin

2015=2645.96/181652*100=1%

2016=3517.79/157208*100=2%

2017=562.98/128593*100=0%

2018=63.78/171568*100=0%

2019=-954.87/225920*100=0%

Return on asset
2015 =2568.66/105382*100=2%

2016 =2368/157208*100=2%

2017 =379.3/2218.33*100=17%

2018 =63.78/22768.47*100=0%

2019 =-954.87/23566.100=-4%

Return on equity
2015 =2586.66/18623.32*100=14%

2016 =2386.71/17150.52*100=14%

20
2017 =379.3/9721.02*100=4%

2018 =63.78/9341.06*100=1%

2019 =-954.87/8384.67*100=-11%

Earnings per share

2015=3527.1/7665.96=0.460098931

2016=2386.71/7665.96=0.311338697

2017=379.3/7665.96=0.049478474

2018=63.78/7665.96=0.008319897

2019=-954.87/7665.96=0.1245597

Dividend per share

2015=9960.35/7665.96=1.299295848

2016=8693.16/7665.96=1.13399496

2017=1270.35/7665.96=0.165713101

2018=947.57/7665.96=0.12360748

2019=-14.6/7665.96=0.0019045

21
 Proftability Ratio
8

0
1 2 3 4 5 6

GROSS PROFIT MARGIN OPERATING PROFIT MARGIN

NET PROFIT MARGIN RETURN ON ASSET RETURN ON EQUITY
EARNING PER SHARE DIVIDENT PER SHARE TOTAL

Graph

22
Interpretation

Gross profit margin

In 2016 and 2017 the ratios that there were profits more than its cost and in 2015, 2017, 2019

We can see that the company cost is more than its profits

Operating profit margins

The ratio indicates that there is decreasing profit margin due to less sales and there is more cost
than the profit

Net profit margin

The ratio shows that in 2015 and 2016 there is an increase in ratio which shows that the company is
selling more goods and services or they have increased their prices and from 2017 to 2019 there is
decreasing ratio which shows they have poor pricing strategies or they are using ineffective cost
structure

Return on asset
The ratio indicates there is increase in which shows that either the net income is increasing or
average total assets are decreasing and the decrease indicates which is from 2017 and 2019 and it
shows that there is a profit and due their investment that they have made and it is showing
promising colors

Return on equity
The ratio indicates decrease which shows that the business is not efficient in generating profit thus
there are less sales and are decreasing every day

Earnings per share

The ratio indicates decrease which shows that the company is in trouble due to less efficacy and
sales through which it can lead to decline in stock price

Dividend per share

The ratio indicates decrease which shows that the company could have reinvested their profits or
they would have paid the amount for their debt or we could see that the company might have not
made any profits

Market Ratio

23
 Market value ratio are used to evaluate the current share of a publicity –held company stock.
These ratios are employed by current and potential investors to determine whether a
company's shares are over-priced or under-priced. The most common market value ratios are:

Price earnings ratio = market price per share equity share \earning per share *100

Market/Book Value Ratio = common stock equity/book value per share

MARKET
RATIOS    2015 2016 2017 2018 2019

PRICE market price

EARNING purchase/earning
RATIO per share 3526.626349 8693.136581 379.2077326 63.72979414 -14.60122

MARKET/BOO common stock

K VALUE equity/book
RATIO value per share 0.001407856 0.001304461 0.001282051 0.001265502 0.0013508

3526.62775 8693.13788 379.209014 63.7310596 -

TOTAL   7 6 7 4 14.599869

Price earnings ratio

2015=3527.12-9960.35/766.6/26.32=3526.626349

24
2016=8693.16-2368.71/766.6/131.94= 8693.136581

2017=379.3-1270.35/766.6/17.96=379.2077326

2018=63.78-947.57/766.6/24.62= 63.72979414

2019=-14.6-24.6/766.6/26.3= 14.60122

Market Value ratio

2015=7665.96/7665.96/710.30. = 001407856

2016=7665.96/7665.96/766.6 =0.001304461

2017=7665.96/7665.96/780 = 0.001282051

2018=7665.96/7665.96/790.2 =0.001265502

2019=7665.96/7665.96/740.3 =0.0013508

Graph
Chart Title
10000

8000

6000

4000

2000

0
2015 2016 2017 2018 2019

-2000

Interpretation

25
 • Price earnings ratio

The ratio shows increase in 2015 and 2016 which shows that the company stock is overvalued but in

the 2017 to 2019 it shows that the ratio is low which shows that the stock is undervalued which

means that their business is undervalue because their stock price trade relatives to its fundamentals

• Market/book value rate

The ratio is low which indicates the that you can buy the stock for the low price relative to the value

of its fundamentals of its assets

Debt Ratio

Debt ratio is calculated to determine the ability of business to serve its debt long term.

26
Debt to equity = non-current liabilities \ owners' equity

Interest coverage ratio = Earning before interest / interest expense

Financial leverage multiplier = Total asset / total equity

total
liabilities/total
DEBT RATIO assets 0.053180145 0.220825475 0.319045131 0.386975797 0.49086102

INTEREST
COVERAGE EBIT/interest -
RATIO expense 2.004595792 -217.143827 -51.6495413 100.7810651 26.6883337

DEBT TO total
EQUITY debts/total
RATIO equity 0.034902477 0.029153635 0.423961683 0.428216926 0.4309949

FINANCIAL total
LEVERAGE assets/total
MULTIPLIER equity 5.658604373 1.44099246 2.285596573 2.437461059 2.81061747

TOTAL   3.742091203 -215.452856 -48.6209379 104.0337189 30.4208071

Debt to equity ratio

2015=650/18623.32=0.034902477

2016=500/17150.52=0.029153635

2017=4121.34/9721.02=0.423961683
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2018=4000/9341.06=0.428216926

2019=3613.75/8384.67= 0.4309949

Interest coverage ratio

2015=3620.3/-1806=-2.004595792

2016=3517.73/-16.2=-217.143827

2017=562.98/-10.9=-51.6495413

2018=-170.32/-1.69=100.7810651

2019=-1100.36/-41.23=26.6883337

Financial leverage multiplier

2015=105382/18623.32=5.658604373

2016=24713.77/17150.52=1.44099246

2017=22218.33/9721.02=2.285596573

2018=22768.47/9341.06=2.437461059

2019=23566.1/8384.67=2.81061747

Debt Ratio
2015=5604.23/105382=0.053180145

2016=5457.43/24713.77=0.220825475

2017=7088.65/22218.33=0.319045131

2018=8810.99/22768.84=0.386975797

2019=11567.68/23566.1=0.4908610

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Graph

Chart Title
150

100

50

0
2015 2016 2017 2018 2019

-50

-100

-150

-200

-250

Debt ratio Interest coverage ratio

Debt equity ratio financial leverage multiplyer

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Interpretation

Interest coverage ratio

The ratio indicates from 2015 to 2017 it is being decrease which means that the lower the ratio the
more the company is burden by debt and in increase from 2018 to 2019 shows that the company is
more capable to meet its interest obligations from operating earnings

Debt to equity ratio

The ratio indicates increase which means the that company must have its sales increase through
which the company would reinvest and add more assets and letting the debt down.

Financial leverage Multiplier

The ratio shows decrease in 2015 and 2016 which means that the company has lower financial
leverage which shows that the company is not taking excessive debts to finance its asset but from
2017 to 2019 there is an increase which shows that the company debt portion of total assets is
increasing which results in more financial leverage for the company

Finished Good turnover in days

Finished goods turnover in days:

Formula: 365/Finished goods turnover

Calculation for 2019 =365/8.99
=40.6 days
Calculation for 2018 =365/9.39
=38.8 days
Calculation for 2017 =365/9.76

=37.39 days

Calculation for 2016 = 365/10.40

=35.0 days

Calculation for 2015 =365/4.43

=82.39 days

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 2015 2016 2017 2018 2019

82.39 35.0 37.39 38.8 40.6

Interpretation
The ratio indicates that there must be more stock due to any company’s reason such as weather
conditions or another reason through which it shows that the finished goods stock will be lower

Account payable turnover in days

1. Account payable turn over:

Formula: 365/Account payable

Calculation for 2019 =365/9.5

=38.42 times

Calculation for 2018 =365/8.9

=41.01 times

Calculation for 2017 =365/9.2

=39.67 times

Calculation for 2016 =365/9.7

=37.6 times

Calculation for 2015 =365/10.1

=10.1 times

2015 2016 2017 2018 2019

10.1 37.6 39.67 41.01 38.42

Interpretation
The ratio indicates increasing from 2015 to 2018 which shows that the company has plenty of cash
available to pay off its short term debt and it also shows the company is managing their debts and
cash flow effectively and there is a decrease in 2019 which shows that the company is taking longer
to pay its off its debts which is a bad sign for the company

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Long term debt Capitalization
2. Long term debt to capitalization: Formula: LTD + Preferred stock + common stock

2019 =3200+0+766.6

=3966.6

2018 =4000+766.6

=4766.6

2017 =4000+766.6

=4766.6

2016 =500+766.6

=1266.6

2015 = 450+800

=1250

2015 2016 2017 2018 2019

1250 1266.6 4766.6 4766.6
3966.6

Interpretation
The ratio indicates from 2015 to 2018 there an increase which shows the firm is in a financial
weakness and is at risk but in 2019 the ratio decreases which means that the business is trying to get
a hold of its financially.

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Cash flow coverage

2015 2016 2017 2018 2019

Cash flow
coverage =0.31319 =0.30694 =0.08107 =0.07979
3

Cash flow coverage = Operating cash flow / Total debt

2019 = 1522.06/19074.47
=0.07979 times
2018 =1230.81/15181.43
=0.081073 times
2017=4515.67/14711.52
=0.30694 times
2016=5121.51/15846.41
=0.31319 times
2015=5652.31/16023.3
=0.3527556745 times

Interpretation
The ratio is indicating decrease cash flow coverage which means that company is going to
bankruptcy of the company if they do not go to 1 which means that the company is struggling
financially each year.

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Horizontal analysis of balance sheet

34
Vertical analysis of balance sheet

35
Horizontal analysis and vertical analysis of income statement

Summary of the ratios

As we can see that the company is being seen struggling with debts, as we can see that every year
the debt is increasing which can be a good sign but rather it’s a liability thus for this the company

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needs. The company is struggling financially but in 2019 the company is trying to hold back by using
its assets and using them effectively. As the ratios are indicating that if the company would not stand
on its feet but we can see in 2019 that company is at least paying its interest and its expense and to
its vendors but if the situation is like this for long the company would fall financially.

References

• https://www.engro.com/investor-relations/financial-reports/
• https://www.engro.com/app/media/2019/04/engro-corp-annual-report-2018.pdf
• https://www.engrofertilizers.com/downloads/
• https://www.investing.com/equities/engro-foods-balance-sheet
• https://www.investing.com/equities/engro-foods-income-statement

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