THEORY AND PRACTICE OF FINANCIAL MANAGEMENT

“FINICIAL ANALYSIS OF TEXTILE INDUSTRY”

BY
AFNAN ASHRAF
FARIHA KHAN
FASIH UR RASHEED
SANIA ASLAM
SAQIB ISMAIL KHATRI
SOBHAN
UBAID DAWOOD

Supervisor
SIR FARAZ NASEEM

Department of Management
College of Business Management
Institute of Business Management (IoBM)

Karachi
TABLE OF CONTENT
 The Textile Industry
In 2018-2019, Pakistan’s largest export industry was the textile industry with hosiery and readymade
garments contributing 544 billion PKR or 3.47 billion USD to total trade. Although the textile industry
was the biggest contributor to country’s exports, the industry itself did not demonstrate any impressive
performance. In fact, the textile industry contracted by 0.2% in FY 2018-19 as compared to a growth of
0.5% last year. The growth subdued on account of lackluster performance of the cotton yarn and cotton
cloth. Cotton production declined by 17.5% whereas the area under cultivation for cotton shrunk by
12.1% reflecting the performance of the crop on which the textile industry is heavily relying. Textile
export increased by 1.4% to US$ 13.56 billion in FY 2018- 19 with knitwear/ bed wear and readymade
garments export increased by 4.67% and 3.63% respectively. The Chinese investors recognizing
Pakistan’s potential as the world’s fourth largest cotton producer have signed a cooperation framework
agreement with government of Punjab with keen interest in developing business in the textile sector of
Punjab that may change the textile landscape of the country.

According to the Pakistan Economic Survey2018-19 analyzed by Gallup Pakistan, in 2018-2019,

Pakistan’s largest export industry was the textile industry, with hosiery and readymade garments
contributing 544billion PKR/3.47 billion USD to total trade. Of a grand total of 2.2trillion PKR earned
from exports, 285billion rupees were earned from hosiery (13% of total export earnings); 259billion
from ready made garments(11%); 227 billion from bed wear(10%); 211billion from cotton fabrics(9%);
199billion from rice(9%); 111billion from chemicals and pharmaceuticals(5%); 110billion from cotton
yarn(5%); 77billion from towels(3%); 47billion from leather manufactures (2%) and 733billion from other
products(33%). However, total exports (2,263 billion) in 2018-2019, when compared to total
imports (5,371 billion) paint a bleak picture of Pakistan’s economic standing. The3,107billion rupee
difference between exports and imports highlights an urgent need for development of our trade sector.

FEROZE MILLS
Feroze1888 Mills (Pvt) limited, is one of the leading Manufacturer and Exporter of Specialized
Yarn & Textile Terry Products in Pakistan. Starting its journey in early 1970s, Feroze1888 has
progressed gradually. As an ISO certified company, it maintains high standards in all areas,
ranging from the highest quality products to maximum employee satisfaction. Company has state
of the art vertically integrated terry towel manufacturing facility with strength of around 12,000
management and non-management staff members.

Feroze1888 believe in providing a professional work environment with tremendous growth

opportunities at all levels. Being partnered with 1888 Mills (USA) , it is recognized as a
Progressive and Global manufacturer of quality textiles for Home, Hospitality & Healthcare.
Company’s Targets:

Excellent Execution Every time

Customer Delight

Company’s Commitments:

Environmental Friendly Production Processes

Product Quality

Conducive Work Environment

Employee Engagement & Empowerment

The Philosophy

Weaving A Better World – A Better Pakistan

The concept of Weaving A Better World derives its soul from an attempt to thrive for innovation
and takes on the lead in the global market by focusing on promoting safe working conditions,
minimized environmental hazards and vigorous efforts to reduce poverty by creating
employment opportunities. This concept termed as Triple Bottom Line (TBL), used
synonymously with the phrase “People, Planet, and Prosperity” reflects the organization’s social,
environmental, and economic success.

Narrowing it down to our own land, “A Better Pakistan” is the vision that has emerged from this
broader vision. The extended family of Feroze1888 has pledged to carry this vision through its
production profitability by utilizing economic and environmental friendly ways. Its focus is also
to provide growth opportunities to all and open ways for people in general for sustained
employment

Vision

Our aim is to be a market leader in terry textile manufacturing with our strong commitment to 3
Ps (People – Planet – Prosperity). We will prosper by creating unmatchable value for our global
customers and stakeholders through our exceptional quality products and services.
Mission

We are a leading vertically integrated industry known for its state of the art machinery,
infrastructure, standardized systems, production processes and adopting the ideology of 3 Ps
(People – Planet - Prosperity). We are committed to the ongoing learning, development &
growth of our valued employees. Our focus is on building an environment of prosperity and
gratification for all our customers and stakeholders through our operational excellence and
solution based innovations.

NISHAT MILLS LIMITED

INTRPDUCTION:

Nishat Mills Limited is a leading brand in Pakistan and is a flagship company of Nishat Groups.
The overall view of this report is to analyze the financial statements and performing ratio analysis
of the company is past three years. What is the difference that occur is ratio in past trends and also
predicting the upcoming ratio through past trends?

ABOUT COMPANY:

Nishat Mills Limited is the flagship company of Nishat Group. It was established in 1951. It is one
of the most modern, largest vertically integrated textile companies in Pakistan. It is one of the most
sought-after retail brands in UAE operating 11 stores across the nation with counterparts in Canada
and KSA. Nishat Mills Limited has 227,640 spindles, 805 Toyota air jet looms. The Company
also has the most modern textile dyeing and processing units, 2 stitching units for home textile,
Two stitching units for garments and Power Generation facilities with a capacity of 120 MW. The
Company’s total export for the year 2016 was Rs. 35.931 billion (US$ 344.744 million). Due to
the application of prudent management policies, consolidation of operations, a strong balance sheet
and an effective marketing strategy, the growth trend is expected to continue in the years to come.
The Company's production facilities comprise of spinning, weaving, processing, stitching and
power generation.
VISION STATEMENT

To transform the Company into a modern and dynamic yarn, cloth and processed cloth and finished
product manufacturing Company that is fully equipped to play a meaningful role on sustainable
basis in the economy of Pakistan. To transform the Company into a modern and dynamic power
generating Company that is fully equipped to play a meaningful role on sustainable basis in the
economy of Pakistan.

MISSION STATEMENT

To provide quality products to customers and explore new markets to promote/expand sales of the
Company through good governance and foster a sound and dynamic team, so as to achieve
optimum prices of products of the Company for sustainable and equitable growth and prosperity
of the Company.

OVER THE YEARS:

1951 Nishat Mills Limited commenced its business as partnership.

1959 The company incorporated as private limited company.
1961 Nishat Mills Limited was listed on Karachi Stock Exchange.
1989 The Company was listed on Lahore Stock Exchange.
1992 The Company was listed on Islamabad Stock Exchange.
1996 Acquired the operating assets of Nishat Tek Limited and Nishat Fabrics
Limited.
2005 Acquired the assets of Umer Fabrics Limited.
2008 Acquired the assets of Nishat Apparel Limited.
CORE VALUES:

The vision & values of the Group remain integrated & aligned with the Group’s culture & work
ethics in all organizations. We value:

• HONESTY

• COMMITMENT

• PASSION

• INNOVATION

• COURAGE

Gul Ahmed Textile

Gul Ahmed is a brand synonymous with quality, innovation & reliability not just in Pakistan but all over
the world. The mill is a composite unit, making everything from cotton yarn to finished product
Manufacturing takes place in decentralized production unit, strictly focusing on specialization all under
one recognized & reputed name.

About Gul Ahmed

The group began trading in textiles in the early 1900’s. With all its know-how and experience, the group
decided to enter the field of manufacturing and Gul Ahmed Textile Mills Ltd. was incorporated as a
private limited company, in the year 1953. In 1972 it was subsequently listed on the Karachi Stock
Exchange. Since then the company has been making rapid progress and is one of the best composite
textile houses in the world. The mill is presently a composite unit with an installed capacity of 103,000
spindles, 220 wide width air jet looms, 90 Sulzer’s, 297 conventional looms and a state of the art
processing and finishing unit.

Gul Ahmed’s textile products represents a unique fusion of century old tradition of the east and the
latest textile technology of west, the purest of cotton fibers are spun, woven & processed into the finest
quality cotton & blended products, through a combination of cutting edge technology & highly skilled
craftsmanship. Products include bed linen, curtains, fabric and yarn. The company’s spinning line
specializes in medium to fine count cotton yarns & is also capable of producing wide variety of synthetic
fibers.

Gul Ahmed has introduced new fashion trends and dictated the style of the day with its classic yet
contemporary designs. In house designers are constantly striving to keep up with the latest fashions and
come-up with innovative designs that became fashion statements of the day.
Vision
Setting trends globally in the textile industry. Responsibly delivering the products and services to our
partners.

Mission
To deliver value to our partners through innovative technology and teamwork. Fulfilling our social and
environmental responsibilities.

Core Values
 Integrity: We always act with honesty and transparency in all that we do. We do what we say
and believe in keeping our promises and commitments
 Respect: We treat our people and business partners with respect, fairness and humbleness. We
also encourage people to share their opinions even if it differs from our own.
 Passion: We believe passion is the fuel that inspires and drives us to lead Passion and move
forward.
 Quality: We demonstrate quality and strive for excellence through Quality all our actions.
 Team Work: We are one team and committed to an environment where every person is a
valued member and treated with respect. We encourage togetherness believe in recognizing
team efforts.

Financial Overview
During FY 2018-19, the management focused on profitable avenues, maximizing efficiency in production
activities and cost rationalization through various measures. These endeavors as well as new and BMR
investments made in the past few years proved beneficial as sales increased by 26% and gross profit
increased by an impressive amount of PKR 2.67 billion which is a 28% increase as compared to last year
gross profit. Accordingly, profit before tax increased by 72% exhibiting increase from Rs. 2,328 million to
Rs. 4,003 million, while profit after tax increased from Rs. 2,075 million to Rs. 3,646 million. Resultantly,
the Company’s EPS improved from Rs. 5.82 to Rs. 10.12. The management continued with its policy of
taking advantage of historically low & subsidized mark-up rates, which would remain locked over the
term of loan. Hence, net long-term financing was enhanced by 28% during the year to fund BMR
investments and acquire latest technology in various production.

As at the year ended June 30, 2019, debt to equity and financial leverage ratios were at 0.58 (2018:
0.55) and 1.89 (2018: 1.85) respectively. The investment has yielded extra margin to the Company both
during the year under review and should yield favorable results in the coming quarters of the ensuing
financial year. Considering the Rupee Dollar subsequent party and prices of raw material, management
invested substantial amount in building raw material inventories, which has increased the amount
invested in working capital. At the year ended June 30, 2019, working capital was Rs. 4,818 million as
compared to Rs. 3,192 million as at last year.

.
 FINICIAL ANALYSIS

All three companies Feroze, Nishat and Gul Ahmed are the A-listers of the textile industry. Their
individual performance and comparison to each other and the industry is provided as under:

FEROZE

Profitability ratios
Gross profit ratio % 26.12 22.16 23.28
Operating leverage ratio Times
EBITDA margin to sales % 25 16.69 14.7
Net profit to sales %
Return on equity % 29.79 17.02 17.16
Return on capital employed % 27.11 16.27 16.66

Liquidity Ratios 2019 2018 2017

Current ratio 1.73 1.94 2.76
Quick / acid test ratio 1.11 1.24 1.67
Cash ratio 0.28 0.03 0.02
Cash flow from operations to sales

Capital Ratios 2019 2018 2017

Financial leverage ratio 0.97 0.69 0.89
Weighted average cost of debt 1.32 1.92 2.11
Debt to Capital ratio 40.82 30.77 22.58
Interest cover ratio 79.13 66.57 159.54

Turnover Ratio 2019 2018 2017

Inventory turnover Days 87.03 81.07 75.95
Inventory turnover ratio
Debtor turnover Days 80.01 80 62.21
Debtor turnover ratio
Creditors turnover Days 20.28 12.35 11.59
Creditors turnover ratio
Fixed assets turnover ratio 2.41 2.28 2.79
Total assets turnover ratio Times 1.02 1.03 1.22
Operating cycle 146.76 148.73 126.56
ANALYSIS:

The Profitability ratios are showing a rising trend over the years, due to business growth,
retention and expansion of customers base and effective utilizaion of fixed assets along with
costs reduction measures to counter the effect of reducing sales prices in export market due to
increasing competition and bargaining power of buyers. Also, raw material procurement has
improved with better costs management. Rupee depreciation has positively affected profitability
as its an export oriented business. Shareholders earned excellent returns on their investments as
ROE increased from 17.16 to 29.79.

Liquidity ratios of the company has seen a decline over the period, due to higher borrowings and
capital expenditures, as well as volatility in raw material prices. Overall, the liquidity
performance seems efficient as the company has more surplus cash for working capital
requirements in 2019 as well as optimized inventory management to support sales and reduce
overall costs.

The operating cycle represents flexible credit policy of the company, as it takes 80 days to
collect receivables while pays off its debtors in 20 days. It can negatively impact liquidity of the
company and need for short term borrowings. The operating cycle has increased as result of
increased Days in Inventory. However, the company has improved on increasing the "No. of
days in creditors". The flexible credit policy is used to increase sales which is evident from
volumetric sales growth. The fixed assets turnover ratio has decreased because of capital
expansion in plant machinery and equipment for future sales.

ANALYSIS OF BALANCE SHEET AND INCOME STATEMENT:

Due to high volumetric growth, raw material prices and cyclical fluctuations, the short term
borrowings have increased from 3% to 19% over this period to cater working captial
requirements. However, the company does keep sufficient current assets in form of inventories to
support its operating activities and have good liquidity postion. The long term loans have
increased from 2% to 6% in order to finanace capital projects like plant and machinery in order
to support sales growth. Nevertheless, long term loans comprise a small portion of total assets.
Overall the total liabilities have increased from 23% to 41% due to high growth and working
capital requirements to pay off short term liabilities. Total equity comprises a much lesser
portion of total assets (77% to 59%) due to significant increase in debt financing. Share of debt
financing has increased in capital structure which shows signs of aggresive business strategies.
 INDEX ANALYSIS

Index analysis
2019 2018 2017
Sales 139.6718 104.00297 100
Gross profit 156.69293 98.988394 100
Operating profit 254.59672 115.37637 100
Earnings before interest
tax Profit before tax 253.9532 114.46899 100
Profit / (loss) after tax 240.57779 110.54028 100
Cash dividend 175.78132 93.532432 100

Balance Sheet 2019 2018 2017

Property, plant and equipment 162.89804 131.285158 100
Intangible 62.2521008 62.8571429 100
Long term investment, loans, advances and deposits 2626.54649 108.066399 100
Net CA 194.006746 119.388655 100
Total Assets 181.270421 124.620412 100
Long term Financing 455.583312 171.645369 100
Deferred liabilities
Net LL 488.408801 171.645369 100
Trade and other payables 154.555961 116.511912 100
Short term borrowings 1298 510 100
Accrued Markup 989.848308 362.543757 100
Current portion of long-term financing
Taxation Net 100
Unclaimed dividend 173.586654 106.580167 100
Unpaid Dividend
Net CL 309.181348 169.616823 100
Total Liabilities 327.700413 169.826427 100
Share Capital 100 100 100
capital Reserves 152.101618 115.450678 100
Total Equity 138.569658 111.43779 100
L+ E 181.270421 124.620412 100
ANALYSIS:

As per Balance Sheet analysis, company is investing on long term investments and capacity
enhancement via long term debt financing. The long term investments have seen a massive
increase as well the LT debt financing. Therefore, the company's long term liabilities have
increased by 4.5 times. It is because of increasing sales growth, sales forecasts and operating
capacity expansion.

Working capital management is done through increased short term borrowings to finance
operating activities. The short term borrowings have increased by 13 times wrt year 2017. It is
due to sales growth, demand and prices of raw materials, fuel and operating costs that have
increased in year 2019. The accrued interest liabilities have increased by almost 10 times, due to
interest due on principal loan amount but the monetary value is not high. The Capital reserves
have increased over the period of two years for utilization in capital expenditures and projects.
Total liabilities have increased significantly compared to total equity, over the period of years.

NISHAT LIMITED

Profitability ratios
Gross profit ratio % 12.06 10.33 10.92
Operating leverage ratio Times 2.42 0.03 -4.75
EBITDA margin to sales % 17.66 15.63 16.72
Pre tax Profit % 10.86 9.23 10.19
Return on equity % 8.23 4.98 4.99
After tax Profit % 9.23 7.63 8.65

Liquidity Ratios
Current ratio 1.26 1.37 1.28
Quick / acid test ratio 0.55 0.71 0.62
Cash to current liabilities Times 0.02 0 0
Cash flow from operations to sales Times 0.01 0.04 -0.03

Capital Ratios
Financial leverage ratio % 37.57 26.21 24.83
Weighted average cost of debt % 7.44 4.75 4.68
Debt to equity ratio % 7.9 6.86 5.91
Interest cover ratio Times 5.13 5.99 6.49

Turnover Ratio
Inventory turnover Days 95.55 94.56 94.32
 Inventory turnover ratio Times 3.82 3.86 3.87
Debtor turnover Days 25.12 21.32 16.67
Debtor turnover ratio Times 14.53 17.12 21.89
Creditors turnover Days 83.14 81.84 84.88
Creditors turnover ratio Times 4.39 4.46 4.3
Fixed assets turnover ratio Times 2.19 1.91 1.77
Total assets turnover ratio Times 0.63 0.52 0.42
Operating cycle Days 37.53 34.04 26.11

ANALYSIS:

Nishat Mills has shown a steady improvement in its performance during the three year period.
The company started its gross margin from 10% in 2017 and worked up to near 12% in 2019.
Company did not perform well in 2018 but figures show that in 2019 company increased its
profits and were ready to compete in market again.

Nishat Mills liquidity position is an alarming state as the company makes sales on cash basis,
however the current ratio and quick ratio, both are below the average maintenance figure that
is derived from the industry. Cash to current liability ratio is near to zero and the company's
cash flow from operations is zero which depicts that the company is generating cash from other
activities which puts the company at great liquidity risk.

Capital ratios are showing a positive sign. Financial leverage ratio, weighted average cost of
debt, debt to equiy is in increasing trend while interest cover ratio is showing the a good
reponse as it is decreasing yearly. But on the other hand we can say that maybe investors are
now not lending money to nishat mills as 2018 year was not a good year.
Inventory turnover ratio tends to increase a bit, this means in year 2019 inventory is pilling up.
Deptor turnover in days is 25 days and creditor turnover in days is around 84 days this means
company collects its receivable around 3.5 times faster than it has to clear its creditors. Overall
we can say that Nishat mills although had a rough 2018 but now its doing well in the 2019 and
had a great comeback.
ANALYSIS OF BALANCE SHEET AND INCOME STATEMENT:

Based on the analysis of the company's balance sheet, major portion of the balance Long term
investment, and then property, plant and equipment, which declares that the company has
sufficient funds retained in its accounts to carry out its daily operations. Total Current Asset of
company is also increasing so there may be a chance that nishat is pilling up its inventory and
raw materials for the incentory . Company's Liabilties in shape of short term or long term is also
increasing.

COMMONSIZE ANALYSIS

Common size analysis 2019 2018 2017

Sales 100.00% 100.00% 100.00%
Gross profit 12.06% 10.33% 10.92%
Operating profit 17.66% 15.63% 16.72%
Earnings before interest and tax 8.12% 7.64% 8.65%
Profit before tax 10.86% 9.23% 10.19%
Profit / (loss) after tax 9.23% 7.63% 8.65%

Non Current Assets

Property, plant and equipment 28.81% 27.43% 23.63%
Long Term Investments 34.74% 43.57% 51.06%
Other Non-Current Assets 0.84% 0.74% 0.64%
Current Assets
Stores, Spares and Loose Tools 3.09% 1.67% 1.79%
Stock in Trade 16.92% 11.92% 10.83%
Short Term Investments 0.00% 2.51% 2.16%
Other Current Assets 15.60% 12.17% 9.90%
Total Assets 100.00% 100.00% 100.00%
Share Holders Equity 66.25% 73.70% 75.52%
Non-Current Liabilities
Long Term Financing 5.23% 5.05% 4.46%
Deferred Tax 0.21% 0.56% 0.67%
Current Liabilities
Short Term Borrowings 17.88% 12.17% 12.51%
Current Portion of Long Term Liabilities 1.77% 2.09% 1.78%
Other Current Liabilities 8.64% 6.43% 5.06%
 Total Equity and Liabilities 100.00% 100.00% 100.00%

ANALYSIS:

Based on the common size analysis, the results presents that the company's net income stands
at 9.23% of the total sales of the company. This data shows an increase over the three year
period. Nishat is doing well in this area as there is an increasing trend in gross profit, operating
profit and net profit as well

INDEX ANALYSIS

Index analysis
2019 2018 2017
Sales 128.94% 109.10% 100.00%
Gross profit 142.32% 103.17% 100.00%
Operating profit 136.18% 101.98% 100.00%
tax Profit before tax 121.10% 96.31% 100.00%
Profit / (loss) after tax 137.38% 98.74% 100.00%
Earning Per Share 137.46% 96.12% 100.00%

Property, plant and equipment 104.32% 101.48% 100.00%

Long Term Investments 58.21% 74.59% 100.00%
Other Non-Current Assets 112.36% 99.99% 100.00%
Current Assets
Stores, Spares and Loose Tools 147.28% 81.35% 100.00%
Stock in Trade 133.69% 96.23% 100.00%
Short Term Investments 0.00% 101.80% 100.00%
Other Current Assets 134.84% 107.49% 100.00%
Total Assets 85.55% 87.41% 100.00%
Share Holders Equity 75.05% 85.30% 100.00%
Non-Current Liabilities
Long Term Financing 100.27% 98.96% 100.00%
 Deferred Tax 27.50% 73.00% 100.00%
Current Liabilities
Short Term Borrowings 122.35% 85.10% 100.00%
Current Portion of Long Term
Liabilities 85.26% 102.48% 100.00%
Other Current Liabilities 146.06% 111.09% 100.00%

Total Equity and Liabilities 85.55% 87.41% 100.00%

ANALYSIS:

The company has shown a great improvement in its overall performance. Sales percentage
have increase by 9% and 19% percentage in 2018 and 2019 respectively. An increase in
operating profit and gross profit is also evident. An increase in net income is also evident based
on the figures provided above. In 2018 company was struggling we can see from the figures but
they had a strong come back in 2019 and made their profits better.

Index analysis for the balance sheet has also been concluded which presents that the overall
increase in the positive elements of the balances sheet, such as current assets have been
observed. A significant increase in the company's reserves is also evident.

The company has eliminated its short term investments as they were not much profitable for
the nishat mills and decreased its long term investments. They manage to acquire more of raw
matterials and focussed more on their core business. In 2019 Deffered tax decreased from 73%
to 27.5%. share holder equity decreased from 85.5% to 75%. Total share holder equity and
laibility was 100% in 2017, 87% in 2018 and 85.55% in 2019. By the analysis we can say that
2018 was not a good year for Nishat Mill but they are now imporving and had a good comeback
in 2019

GUL AHMED

Profitability ratios
Gross profit ratio % 20.92 20.99 17.99
Operating leverage ratio Times 0.08 0.08 -1.03
EBITDA margin to sales % 12.99 11.37 8.16
Net profit to sales % 6.3 4.55 2.04
Return on equity % 23.54 16.44 8.34
Return on capital employed % 22.52 16.89 10.52

Liquidity Ratios
 Current ratio 1.16 1.14 1.11
Quick / acid test ratio 0.39 0.4 0.37
Cash to current liabilities 0.02 0.02 0.01
Cash flow from operations to sales 0 -0.02 0.05

Capital Ratios
Financial leverage ratio 1.89 1.85 1.81
Weighted average cost of debt 0.05 0.04 0.04
Debt to equity ratio 0.58 0.55 0.65
Interest cover ratio 3.72 3.36 1.92

Turnover Ratio
Inventory turnover Days 151 145 146
Inventory turnover ratio 2.42 2.52 2.5
Debtor turnover Days 40 35 26
Debtor turnover ratio 9.19 10.44 14.04
Creditors turnover Days 149 148 204
Creditors turnover ratio 2.45 2.46 1.79
Fixed assets turnover ratio 3.02 2.83 2.51
Total assets turnover ratio 1.05 1.05 1.09
Operating cycle 42 32 -31

ANALYSIS:

Gul Ahmed has shown a steady improvement in its performance during the three year period.
The company started its gross margin from 18% in 2017 and worked up to near 21% in 2019.
Similar increase is shown in net margin sales of the company. However, the company's leverage
ratio has improved but it is evident that profits are not enough to cover the interest cost of the
company.

Gul Ahmed's liquidity position is an alarming state as the company makes sales on cash basis,
however the current ratio and quick ratio, both are below the average maintenance figure that
is derived from the industry. Cash to current liability ratio is near to zero and the company's
cash flow from operations is zero which depicts that the company is generating cash from other
activities which puts the company at great liquidity risk.
Company's interest cover and debt ratio is in a balance state and is also improving year-on-year
wise, however, the company may be required better manage its leverage indicators in order to
ensure that the company does not exceeds its surviving threshold.

Debt turnover and credit turnover are aligned with the best practices followed in the industry,
however the company's total cash conversion cycle exceeds by 42 days which presents that the
company may need short term finance to manage its working capital, hence the high interest
cost that is bared by the company.

Gul Ahmed's fixed asset turnover and total assets turn over has a significant difference which
depicts that the company is heavily dependent on its current assets and being in textile industry
the company may have huge amounts of inventory in its warehouse.

COMMON SIZE ANALYSIS

Common size analysis+F1:I23 2018 2017

Sales 100% 100% 100%
Gross profit 21% 21% 18%
Operating profit 10% 7% 4%
Earnings before interest and
tax 10% 7% 4%
Profit before tax 7% 5% 2%
Profit / (loss) after tax 6% 5% 2%
Cash dividend 2% 2% 1%

Property, plant and

equipment 78% 82% 87%
Intangible 0% 0% 0%
Long term investment, loans,
advances and deposits 2% 2% 2%
Net CA 20% 16% 11%
Total Assets 100% 100% 100%
Long term loans 36% 35% 39%
Deferred liabilities 1% 0% 2%
Total Liabilities 37% 36% 41%
 Share Capital 15% 18% 19%
Reserves 48% 46% 40%
Total Equity 63% 64% 59%
L+ E 100% 100% 100%

ANALYSIS:

Based on the common size analysis, the results presents that the company's net income stands
at 6% of the total sales of the company. This data shows an increase over the three year period.
Cost of sales of the company comprise of 79% of the total sales. Gul Ahmed may need to devise
a strategy to improve its pricing mechanism in order to improve the figure of net income of the
company.

Based on the analysis of the company's balance sheet, major portion of the balance comprise of
property, plant and equipment the second position goes to the company's reserves, which
declares that the company has sufficient funds retained in its accounts to carry out its daily
operations. However, this also has a negative side as the company is not paying out dividends
to shareholders which may render the company's share less marketable. The company revisit
its dividend policy in order to ensure that the investor's of company remain satisfied with the
management of Gul Ahmed.

INDEX ANAYSIS

Index analysis
2019 2018 2017
Sales 42.98% 13.16% 1
Gross profit 66.26% 29.11% 1
Operating profit 225.15% 96.62% 1
Earnings before interest 225.15% 96.62% 1
tax Profit before tax 395.43% 187.76% 1
Profit / (loss) after tax 341.20% 153.67% 1
Cash dividend 150.28% 150.28% 1

Property, plant and equipment 18.94% 0.85% 1

Intangible 32.35% -29.41% 1
Long term investment, loans, advances and
deposits 69.07% 2.75% 1
Net CA 130.75% 52.87% 1
 Total Assets 32.46% 6.73% 1
Long term loans 23.94% -3.27% 1
Deferred liabilities -50.93% -72.98% 1
Total Liabilities 20.72% -6.28% 1
Share Capital 0.00% 0.00% 1
Reserves 60.13% 23.25% 1
Total Equity 40.49% 15.64% 1
L+ E 32.46% 6.73% 1

ANALYSIS:

The company has shown a great improvement in its overall performance. Sales percentage
have increase by 13% and 43% percentage in 2018 and 2019 respectively. An increase in
operating profit and gross profit is also evident. An increase in net income is also evident based
on the figures provided above.

Index analysis for the balance sheet has also been concluded which presents that the overall
increase in the positive elements of the balances sheet, such as current assets have been
observed. A significant increase in the company's reserves is also evident.

The company has also increased its investment by 69% in the year 2019 which presents that the
company is also looking at different sources to generate income as evident from the liquidity
ratio analysis that the company is generating zero cash flow from operating activities.
 COMPARITIVE ANALYSIS

Sales
80,000,000,000

60,000,000,000

40,000,000,000

20,000,000,000

0
Gul Ahmed Nishat Feroze 188

Sales

Gross Profit
14,000,000,000
12,000,000,000
10,000,000,000
8,000,000,000
6,000,000,000
4,000,000,000
2,000,000,000
0
Gul Ahmed Nishat Feroze 188

Amongst the three companies, Gul ahmed ranks the top in terms of profitability. Despite Nishat
being hihger on the sales side the lesser cost of good sold puts gul ahmed ahead. Also the
Stingent pricing policy of gul ahmed plays a part in this.

Net profit
7,000,000,000
6,000,000,000
5,000,000,000
4,000,000,000
3,000,000,000
2,000,000,000
1,000,000,000
0
Gul Ahmed Nishat Feroze 188
 Asset base
150,000,000,000

100,000,000,000

50,000,000,000

0
Gul Ahmed Nishat Feroze 188

Current Assets Total Assets

The net profit shows a significant reduction in gul Ahmed's profit. This is due to operating and
other expenses being on the high side. Gul Ahmed needs to reduce its operating expenses so as
to increase the profitability to remain competitive with the competitors. on the other hand
Feroze 1888 is on the higher side of the net profit margins despite being the lowest in terms of
sales this is due to minimized operating expenses.

Quite astonishingly the asset base for gul ahmed is much below that of nishat still higher
operating costs. They have increased their advertisement and distribution cost considerably
from last year hence the reduced profits.
 “FORCASTING”

Income Statement 2,021 2,020 2,019 2,018

Sales 52,509,713 39,186,353 29,243,547 21,775,447

COGS 38,795,412 28,951,800 21,605,821 16,950,429

Gross profit 13,714,301 10,234,553 7,637,726 4,825,018

Operating expenses 2,263,785 1,689,392 1,260,740 1,935,140

Operating profit 11,450,516 8,545,161 6,376,986 2,889,878

Earnings before interest and tax

Interest expense 155,892 155,892 155,892 85,730

Profit before tax 11,294,624 8,389,269 6,221,094 2,804,148

Tax expense 451,785 335,571 231,484 52,052

Profit / (loss) after tax 10,842,839 8,053,698 5,989,610 2,752,096

Cash dividend 3,686,565 2,738,257 2,053,066 1,092,427

RE 7,156,274 5,315,441 3,936,544 1,659,669

Balance Sheet 2,021 2,020 2,019 2,018

Property, plant and equipment 24,166,769 18,034,902 13,458,882 10,846,978

Intangible 3,325 2,482 1,852 1,870

Long term investment, loans, advances and
deposits 202,533 202,533 202,533 8,333

Net CA 36,457,986 27,207,452 20,304,069 12,494,800

Total Assets 60,830,613 45,447,369 33,967,336 23,351,981

Long term Financing 1,991,546 1,991,546 1,991,546 750,334

Deferred liabilities 143,494 143,494 143,494 -

Net LL 2,135,040 2,135,040 2,135,040 750,334

Trade and other payables 8,817,631 6,580,322 4,910,688 3,701,919

Short term borrowings 6,490,000 6,490,000 6,490,000 2,550,000

Accrued Markup 50,898 50,898 50,898 18,642

Current portion of long-term financing 275,388 275,388 275,388 162,508

Taxation Net - -

Unclaimed dividend - - 1,873 1,150

Unpaid Dividend - - - 224

Net CL 15,633,917 13,396,608 11,728,847 6,434,443

Total Liabilities 17,768,957 15,531,648 13,863,887 7,184,777

Share Capital 3,768,009 3,768,009 3,768,009 3,768,009

capital Reserves 28,807,155 21,650,881 16,335,440 12,399,195

Total Equity 32,575,164 25,418,890 20,103,449 16,167,204

L+ E 50,344,121 40,950,538 33,967,336 23,351,981

Additional Finaning Required 10,486,492 4,496,831

We have forecasted for additional 2 years, by watching the trend the sales are increasing by
34% from 2018 to 2019. We have assumed that the sales will increase from the same trend for
the upcoming years. As the sale is increasing by 34% the cost of good sold is also increasing by
the same trend. Interest expense will remain same as long term or short term borrowing is not
increasing. The amount of tax is increased as profit before tax is increasing which is 4% of profit
before tax. Company is making more profits and cash dividend has also increasined along with
retained earning. Property and plant along with intangibile asset were increased by 34% as the
fixed assets were optimized and utilized on 100% capacity in the past. Company did not took
long term borrowings in 2020 and 2021. Its planning to Emphasize more on equity. Short term
borrowing such as trade and other payables were also increased as feroze textile will be looking
to aquire more raw material for fulfilling the upcoming demand. The total capital reserves will
be increased by 32% from 2019 to 2020 and total equity will be increased by 26.5% from 2019
to 2020.The total capital reserves will be increased by 32% from 2020 to 2021 and total equity
will be increased by 28% from 2020 to 2021. Additional financing requird in 2020 by feroze
textile will be 4,496,831. Additional financing requird in 2020 by feroze textile will be
10,486,492. Overall we can say that Feroze texile has a great future ahead and if someone is
looking to invest in stock market should opt in for Feroze Tetile Mills .
 Appendix

Feroze

Balance Sheet 2019 2018 2017

Property, plant and equipment 13,458,882 10,846,978 8,262,151
Intangible 1,852 1,870 2,975

Long term investment, loans, advances and deposits 202,533 8,333 7,711
Net CA 20,304,069 12,494,800 10,465,651
Total Assets 33,967,336 23,351,981 18,738,488
Long term Financing 1,991,546 750,334 437,142
Deferred liabilities 143,494 0 0
Net LL 2,135,040 750,334 437,142
Trade and other payables 4,910,688 3,701,919 3177288
Short term borrowings 6,490,000 2,550,000 500000
Accrued Markup 50,898 18,642 5142
Current portion of long-term financing 275,388 162,508 -
Taxation Net - - 110008
Unclaimed dividend 1,873 1,150 1079
Unpaid Dividend - 224 -
Net CL 11,728,847 6,434,443 3,793,517
Total Liabilities 13,863,887 7,184,777 4,230,659
Share Capital 3,768,009 3,768,009 3,768,009
capital Reserves 16,335,440 12,399,195 10,739,820
Total Equity 20,103,449 16,167,204 14,507,829
L+ E 33,967,336 23,351,981 18,738,488

INCOME STATEMENT:

Income Statement 2019 2018 2017

Sales 29,243,547 21,775,447 20,937,331
Gross profit 7,637,726 4,825,018 4,874,327
Operating profit 6,376,986 2,889,878 2,504,740
Earnings before interest and tax
Profit before tax 6,221,094 2,804,148 2,449,701
Profit / (loss) after tax 5,989,610 2,752,096 2,489,677
Cash dividend 2,053,066 1,092,427 1,167,966
 NISHAT

Income Statement 2019 2018 2017

Sales 63,499,029 53,729,124 49,247,657
Gross profit 7,656,601 5,550,446 5,379,838
EBITDA 11,211,441 8,395,775 8,233,100
Other Income 5,158,380 4,102,639 4,259,666
Profit Before Tax 6,897,048 4,957,127 5,020,342
Profit After Tax 5,859,048 4,097,127 4,262,342

Balance Sheet
Non Current Assets
28,968,21 28,180,04 27,767,69
Property, plant and equipment 9 9 9
34,930,33 44,757,27 60,008,32
Long Term Investments 3 9 2
Other Non-Current Assets 849,580 756,020 756,107
Current Assets
Stores, Spares and Loose Tools 3,102,988 1,714,031 2,106,878
17,008,45 12,243,65 12,722,71
Stock in Trade 9 2 2
Short Term Investments 0 2,581,520 2,535,973
15,685,81 12,503,48 11,632,58
Other Current Assets 3 2 4
100,545,3 102,736,0 117,530,2
Total Assets 92 33 75
66,615,27 75,713,14 88,762,79
Share Holders Equity 0 5 6
Non-Current Liabilities
Long Term Financing 5,259,927 5,190,839 5,245,629
Deferred Tax 215,440 571,833 783,292
Current Liabilities
17,982,26 12,507,59 14,697,39
Short Term Borrowings 2 0 3
Current Portion of Long Term Liabilities 1,784,470 2,144,900 2,093,024
Other Current Liabilities 8,688,023 6,607,726 5,948,141
 100,545,3 102,736,0 117,530,2
Total Equity and Liabilities 92 33 75

GUL AHMED

Income Statement 2019 2018 2017

Sales 57,288 45,337 40,066
Gross profit 11,982 9,305 7,207
Operating profit 5,482 3,315 1,686
Earnings before interest and
tax 5,482 3,315 1,686
Profit before tax 4,008 2,328 809
Profit / (loss) after tax 3,609 2,075 818
Cash dividend 891 891 356

Balance Sheet
Property, plant and equipment 18,994 16,104 15969
Intangible 45 24 34
Long term investment, loans, advances and
deposits 492 299 291
Net CA 4,818 3192 2088
Total Assets 24,348 19619 18382
Long term loans 8857 6912 7146
Deferred liabilities 158 87 322
Total Liabilities 9015 6999 7468
Share Capital 3565 3565 3565
Reserves 11768 9058 7349
Total Equity 15333 12621 10914
L+ E 24348 19620 18382