Year Shams Din Nishat Hira Crescent Industrial

Average
2020 0.17 0.56 0.59 27.3 0.46 5.744
2019 0.36 0.43 0.55 35.31 0.5 7.68
2018 0.44 0.39 0.71 15.98 0.55 3.852
2017 0.27 0.31 0.62 16.55 0.59 4.054
2016 0.27 0.48 1.32 17.26 0.62 4.826

Acid-Test Ratio:

Quick ratio evaluates the liquidity of a company by comparing its cash plus almost cash current assets
with its entire current financial obligations. It assists in verifying if the business or company has the
capacity to pay off its current liabilities by means of the most liquid assets.

The formula for calculating this is: Current Assets-Inventory/Current Liabilities.

Hira textile has the highest acid-test ratio from 2016-2020 in comparison with the industrial average
ratios. Whereas Shams, Din and Crescent textiles the industrial average is far greater than their acid-test
ratio which shows their poor liquidity states.

The higher Acid-Test ratio of Hira textile clearly indicate that it has a very good liquidity state it can
easily meet its short-term and long term financial liabilities. It can also convert its account receivables
into cash. Its overall industrial average is above line and it has a solid growth in the market. From 2016
to 2018 Hira textile acid-test ratio shows its normal business growth i.e. (17.26, 16.55, 15.98), but in
2019 there came a business boost that its acid-test ratio suddenly doubled to 35.31 whereas in 2020 it
came down to 27.3 depicting a fall in its business.

As in the case of Nishat in 2016 its Acid-Test ratio is above 1 but still below its industrial average ratio
and from 2017-2020 its acid-test ratio is decreasing below 1 showing that its business is dwindling which
clearly shows that it is either losing its financial goodwill to meet its short term and long term liabilities
which happens only when the company cannot convert its receivables into cash.

Whereas in the cases of Crescent, Din and Shams, their Acid-test ratios are below 1 throughout from
2016-2020 which indicates that they have very poor liquidity state hence, they cannot meet their
financial liabilities as their business is running at the lowest so they cannot convert their receivables into
cash easily. It also shows that their assets are much less than their liabilities.
Payable Turnover Ratio:
Year Shams Din Nishat Hira Crescent Industrial
Average
2020 4.81 8.70 3.49 12.22 6 6.6
2019 5.22 30.94 4.39 8.8 8 10.1
2018 6.89 31.79 4.46 18.58 8 13.2
2017 6.59 37.24 4.3 7.14 10 12.5
2016 4.75 34.88 4.65 22.06 9 14.4

The accounts payable turnover ratio indicates to creditors the short-term liquidity and, to that extent,
the creditworthiness of the company. A high ratio indicates prompt payment is being made to suppliers
for purchases on credit. A low ratio indicates slow payment to suppliers for purchases on credit.

The formula for calculating Payable Turnover Ratio: Annual Credit Purchases/ Accounts Payable.

Din Textiles has the Highest Payable turnover ratio from 2016-2019 i.e. (34.88, 37.24, 31.79 and 30.94)
in comparison to its industrial average which is between 10-15 whereas its payable turnover ratio came
down to 8.70 but it’s still higher than the industrial average. This indicates that the company is paying
off suppliers at a faster rate than in previous periods. An increasing ratio means the company has plenty
of cash available to pay off its short-term debt in a timely manner. As a result, an increasing accounts
payable turnover ratio could be an indication that the company managing its debts and cash flow
effectively.

Hira Textiles has the Highest Payable turnover ratio in 2016 i.e. 22.06 in comparison to industrial
average i.e. 14.4 and then in 2017 it came down in comparison to its industrial average and in 2018 it
again goes up to 18.58 which is much higher than its industrial average which is 13.2 and in 2019 it again
came down lower than its industrial average and in 2020 it got higher i.e. 12.22 than its industrial
average i.e. 6.6.

Shams and Nishat Textiles and Crescent has the lowest Payable Turnover ratio throughout from 2016-
2020 in comparison to its industrial average and it indicates that these companies are taking longer to
pay off its suppliers and are in financial distress.
Payable Turnover (PT) in Days:
Year Shams Din Nishat Hira Crescent Industrial
Average
2020 75.88 71.10 104.87 30 64 54.226
2019 69.92 12.35 83.14 41 47 90.094
2018 52.98 13.68 81.84 20 44 85.172
2017 55.38 10.51 84.88 51 35 86.518
2016 76.84 10.94 78.71 16.5 38 83.436

The accounts payable turnover in days shows the average number of days that a payable remains
unpaid.

The formula for calculating accounts payable turnover in days: 365 days/ payable turnover ratio.

Shams textiles shows low payable turnover ratio in days in comparison to its industrial average from
2016 to 2019 which indicates that shams had a slow rate of payment to its creditors for whole of the
year but in 2020 its payable turnover ratio in days i.e. 75.88 is higher than the industrial average i.e.
54.226 which shows that in 2020 it has faster mode of payment to its creditors. Likewise, Din and
Crescent textiles also shows low payable turnover ratio in days in comparison to their industrial average
from 2016 to 2019. Din textiles payable turnover ratio in days increases in 2020 i.e. 71.10 than its
industrial average i.e. 54.226 and Crescent textiles payable turnover ratio increases in 2020 i.e. 64 which
is higher than its industrial average i.e. 54.226.

Whereas, Hira textiles shows a constant decrease in it payable turnover ratio in days from 2016-2020 in
comparison to its industrial averages. It clearly indicates that Hira textiles had a payment problem to its
creditors/ suppliers which in turn shows that it has liquidity issues.

In the case of Nishat textiles, its payable turnover ratio in days from 2016- 2020 is increasing and much
higher than its industrial averages which means that it had a quick payment mode to its creditors and a
good liquidity state, however, in 2020 its payable turnover ratio in days suddenly falls down than its
industrial average that means company has serious financial crisis because of which it cannot pay its
debts in timely manner.
Debt to Total Assets:
Year Shams Din Nishat Hira Crescent Industrial
Average
2020 0.69 44.45 0.35 35.42 5.96 18.772
2019 0.60 46.98 0.33 30.23 6.45 18.626
2018 0.60 37.55 0.26 20.75 4.8 14.408
2017 0.68 42.12 0.24 7.14 5.87 12.996
2016 0.68 37.86 0.22 8.45 3.21 11.688

The debt to total assets ratio is an indicator of a company's financial leverage. It tells you the percentage
of a company's total assets that were financed by creditors. In other words, it is the total amount of a
company's liabilities divided by the total amount of the company's assets.

Formula for calculating Debt to Total Assets: Total Debt/ Total Assets.

Shams and Nishat textiles showing their debt to total assets ratio from 2016-2020 less than 1 in
comparison to its industrial averages. Any debt to total assets ratio less than 1 clearly shows that Shams
has a high number of assets than its total Debt/ Liabilities. Shams has the high financial leverage for
borrowing and has the capacity to sell on credit.

As far as in the cases of Din, Hira and Crescent, their debt to total assets ratios are much higher than 1 in
comparison to their industrial averages from 2016-2020. This financial state indicates that these
companies have a much higher debt/liabilities than their assets which do not provide them the flexibility
in financial terms either to borrow or lend money.