Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Ratio Analysis of PTCL Financial Statement For Year 2009-2010

By:
Khurram Iqbal
EMBA - SZABIST

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Acknowledgment
We are thankful to Almighty Allah who gave us the strength to complete and fulfill this report, Secondly I would like to thank and appreciate the efforts of Mr. Ahmar Athar whos visionary guidance made this project to be completed in time and with all the requirements.

Introduction:

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Pakistan Telecommunication Company Limited (PTCL) is proud to be Pakistans most reliable and largest converged services carrier providing all telecommunications services from basic voice telephony to data, internet, videoconferencing and carrier services to consumers and businesses all over the country.Whether it is an office in the largest city of Pakistan or a home in a small village, we are present in every corner of Pakistan to serve our customers

Companys Profile:
PTCL is all set to redefine the established boundaries of the telecommunication market and is shifting the productivity frontier to new heights. Today, for millions of people, customer demand instant access to new products and ideas. More importantly PTCLs aim is to provide better living standards with increased values in this ever-shrinking globe of ours. PTCL is setting free the spirit of innovation PTCLs aim is to be customers first choice in the future as well, just as it has been over the past six decades for providing; 1. Business & Corporate Users. 2. Nationwide Infrastructure 3. National Long-haul Core Network 4. Carrier services 5. White Label Services 6. EVO Wireless Broadband 7. Fixed Broadband 8. IPTV Service (Smart TV) 9. Pak Internet Exchange 10. V-fone 11. International Networks
a. SEAMEWE-3 Submarine Cable System

b. SEAMEWE-4 Submarine Cable System c. IMEWE Submarine Cable System 12. Satellite Communication

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Analysis:
Current Ratio in 2009 was increase very little in 2010. PTCL current assets were decreased from 54 Million to 45 Million; however this decrease was supplemented with decrease in current liabilities from 36 Million to 30 Million which is overall a good sign for the company that this ratio has an increasing trend. In 2009, PTCL had to pay for Voluntary separation scheme where as in 2010 onwards
PTCL will not have to pay for this liability.

Overall Companys liquidity position is relatively good (1.51) since its liabilities are
reduced as compared to last year (1.50).

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Analysis:
In 2009 PTCL was receiving its receivables in 24 days, in 2010 its averages days are 65 which is not a good sign for the company. It has tremendously increased in these two years.
The increase in DSO indicates that customers, on the average, are not paying their bills on time. This deprives PTCL of funds that it could use to invest in productive assets. Moreover, in some instances the fact that a customer is paying late may signal that the customer is in financial trouble, in which case PTCL may have a hard time ever collecting the receivable. This would be strong evidence that steps should be taken to expedite the collection of receivable.

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Analysis:
In 2009 Fixed Asset turnover ratio was 0.65 and reduced to 0.63 this means PTCL is not using its fixed assets in a good manner. This ratio can be higher if they start using its fixed assets effectively.

The ration indicates that PTCL has used its revenue to purchase new assets however the return on investment is not very good. So far as well as the churn on fixed line is resulting in low sales figures in 2010. Another reason is that PTCL has recently invested to deploy new technologies like IPTV, broadband DSL, VPTCL (WLL Network); these all account in increase of net fixed assets as compared to year 2009.

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Analysis:
In yesr 2010 PTCL paid PTA for WLL license fee. Furthermore PTCL paid Loan to the wholly
owned subsidiary PTML (UFONE) as well. These two entities together was a big expense for PTCL because of which the cash in 2010 is reduced, which eventually resulted decrease in total assets.

In 2010, PTCL also took more Long term loans and did less short term investments in
comparison to year 2009 because of which total assets in year 2010 are less in from year 2009.

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Analysis:
Debt Ratio of PTCL are reduced from 35.4 to 33.8 which indicates that financial position of the company is good and they have paid off some portion of debt which they were having in 2009. At the same time the analysis also shows that probably PTCL has used its total assets to pay off some of its debt.
In case PTCL needs some loan in the near future ten Creditors may be reluctant to lend the firm more money.

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Analysis:
The calculation depicts that there is a remarkable decrease in interest charges which PTCL had to pay in year 2010 as compared to year 2009 because of which the Times Interest Earned has increased twice. PTCLs interest is covered 35.2 times. TIE ratio reinforces the conclusion from our analysis of the debt ratio that PTCL will not face difficulties if it attempted to borrow additional funds.

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Analysis:
The result shows that the Net income of PTCL has increased from last year, however there is reduction in total sales of the organization. There has been reduction in the cost which PTCL had incurred in its operations. This shows that PTCL is managing its operations efficiently as well. In 2009, the Profit margin of PTCL was 15.44 whereas in 2010 it increased to 16.25 which shows reduction of cost.

Analysis:
The result of Basic power ratio shows the raw earning power of the firms assets, before the influence of taxes and leverage, and it is useful for comparing PTCL with different tax situations and different degrees of financial leverage.

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Because of its good turnover ratios and good profit margin on sales, PTCL is earning a good return on its assets .

In 2009, the basic earning power for PTCL was 9.10 whereas in 2010 it increased to 9.475 which shows PTCL is using its assets effectively and earning a good return on it as well.

Analysis:
The result shows that PTCL is getting good return on its total assets. This return results from PTCLs good basic earning power and low interest costs which resulted from its average use of debt, both of which cause its net income to be relatively high.

In 2009, PTCLs ROA was 5.94 whereas in 2010 it increased to 6.16 which shows PTCL s Basic earning power and interest costs are good as compared to last year.

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Analysis:
In 2009 PTCLs Return on common equity was 9.21 whereas in 2010 it increased to 9.32. This ration indicates that companys financial position is good. Stockholders invest to get a return on their money, and this ratio tells how well PTCL is doing. From this ratio we can see that investors will be happy to invest in PTCLs stock shares.

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Analysis:
From the calculation we can see that PTCL has floated total shares of 5.1 Million. In year 2010 PTCLs Net income increased from last year. This increase in Net income resulted in increasing the earning power per share from 1.79 in 2009 to 1.82 in 2010.

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

Analysis:
P/E ratios are higher for firms with strong growth prospects, other things held constant, but they are lower for riskier firms. In 2009, the P/E ratio for PTCL was 5.59 where as in 2010 it decreased to 5.49. Although there is a decrease in P/E ratio but the impact in not huge. This indicates that the company is not riskier and it has growth prospects.

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Ratio Analysis of PTCL Financial Statements for FY 2009 -2010

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