FINANCIAL STATEMENT ANALYSIS

FINAL PROJECT

RATIOS ANALYSIS OF CHERAT CEMENT

SUBMITTED TO
PROFESSOR M. AZEEM

SUBMITTED BY
SULTAN AMEER
G1F18BSAF0010

SUBMISSION DATE
22-06-2022

UNIVERSITY OF CENTRAL PUNJAB

Cherat cement company limited
Cherat cement company
Cherat Cement Company Limited was incorporated in 1981. Its main business activity is
manufacturing, marketing and sale of Ordinary Portland Cement and Clinker. The Company is
amongst the pioneers of cement industry in Pakistan and is the number 1 cement producer in the
region with an annual installed capacity exceeding 4.5 million tons. The cement plant is located
at Village Lakrai, District Nowshera, Khyber Pakhtunkhwa (KPK) province. Due to the cement
plant’s geographical position, it is ideally located to export cement to Afghanistan as well as
cater the local market needs in the KPK, FATA, Punjab and Azad Kashmir The Company is
registered on Pakistan Stock Exchange Limited and is also an ISO 9001 and 14001 certified. The
Company has also recently installed its third cement line at the manufacturing facility
Analysis of family life of cherat cement
I have to assign the task to analyze the company’s inner status by comparing the parameters
driven by finance researchers. The parameters help us to identify the company’s productivity and
stability
The family life of a corporation is depended on the various key points which include company
board size its composition, meetings, CEO duality the shares criteria.
We have to discuss in detail these points and make our judgment about the company
performance
Board size
Board size is the panel of directors of the company who give directions for the company’s major
decisions. They are responsible for making the policies of the company which were according to
the mission and vision of the company.
A company which has the board members of seven to fifteen is consider a good company if the
members were less than seven or more than fifteen than it shows a bad condition.
According to these criteria our company (cherat company) has board size of seven to eight
directors from the year of 2017 – 2020.
In 2017there were seven in 2018 and onward there are eight members in the board.
Board composition
In board composition we discuss the executive and non executive members of the company. The
executive members are the investors and the non executive are the skilled and experienced in the
related business persons hire through a process and according to our research the company which
has 70% or more non executive members then it is a good company.
Our company (cherat company) has different ratio has in 2017 and 18 it has 60% non-executive
members and onforward from 2019-2020 it has 70% of non-executive members which shows a
good sign of company profile as they gain the status of a good company.in addition in 2017 there
is 1 independent director 1 executive director and 6 non executive directors.in 2018 there were2
independent 1 executive and 5 non executive directors.in 2019 and onward there are 3
independent 1 executive and 4 non-executive directors.
,
CEO duality
CEO duality is the designation which is acquired by the member from the board panel in which a
single director has hold two designations at the same time as he is the CEO and Chairman of the
company at the same time
The researchers find out that the company which has CEO duality is not a good company
Our company (cherat company) there are two different directors were holding these positions at
the same time which is a good gesture.
Board diversity
Board diversity is also known as gender diversity as the representation of male and female
directors in the board there is no female representation on board in 2017-18 and in 2019-2020
there were 1 female and 7 or 6 male directors in the company.
Disclose of auditors consulting
The cherat cement every year disclose the dues which were paid to their auditors
Meetings
Every company according to the company law has to held four meeting or quarterly meetings
annually it must not be less than four but it can exceed it due to any reason or to discuss
important issue.
In cherat company they follow the company law and held four meeting annually but they held
more than four meetings to discuss their issue. which is possible according to law in different
years. As in 2017, 6 board meetings 4 audit meetings 2 human resource rumination meetings
were held .in 2018, 5 board meetings 4 audit meetings and 2 meetings of human resource
remuneration is held and it is so on.
Directors’ shareholder
In company the board of directors has a huge volume of shares in the company and the company
in which th share percentage is less than or equal to 25 % is called a good company and in cherat
cement company in 2017 the directors has 20.99 percent shares in 2018 they have 20.76 percent
shares in 2019 and onward they have 21.66 percent shares in the company.
Disclose of auditors consulting
The cherat cement every year disclose the dues which were paid to their auditors
 Comparison of Company’s ratios with Industrial ratios

Gross profit margin

Year Cherat Cement Industry
2017 0.33 0.40
2018 0.22 0.29
2019 0.18 0.23
2020 0.02 0.23

GROSS PROFIT MARGIN

2.4

0.33 0.29
0.22 0.23 0.23
0.18
0.02
YEAR 2017 YEAR 2018 YEAR2019 YEAR 2020

CHERAT INDUSTRY

Analysis
The gross profit margin tells you what your business made after paying for the direct cost of
doing business, which can include labour, materials and other direct production costs. A higher
profit margin is always desirable since it means the company generates more profits from its
sales company’s gross margin is fluctuate from 2017 to 2020 and also the industry has same
situation.
Net profit margin
Year Cherat Cement Industry
2017 0.20 4.26
2018 0.15 3.68
2019 0.11 1.87
2020 0.11 0.37

NET PROFIT MARGIN

4.26

3.68

1.87

0.37
0.2 0.15 0.11 0.11

YEAR 2017 YEAR2018 YEAR2019 YEAR 2020

CHERAT INDUSTRY

Analysis
The net profit margin, also known as net margin, indicates how much net income a company
makes with total sales achieved. A higher net profit margin means that a company is more
efficient at converting sales into actual profit
In this case net profit margin of company decreases as the industry growth rate also decreases
gradually
Return on investment
Year Cherat Cement Industry
2017 0.10 0.11
2018 0.07 0.09
2019 0.05 0.05
2020 0.06 0.01

RETURN ON INVESTMENT
0.11
0.1
0.09

0.07
0.06
0.05

0.01

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
Return on investment is a financial metric that is widely used to measure the probability of
gaining a return from an investment. 
In this case the return on investment from 2017 to 2020 decreases and also the industry level face
the same situation but as compare to industry it has better condition

Return on equity
 Year Cherat Cement Industry
2017 0.19 0.17
2018 0.19 0.15
2019 0.15 0.09
2020 0.19 0.02

RETURN ON EQUITY
0.19 0.19 0.19
0.17
0.15 0.15

0.09

0.02

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
 The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to
generate profits from its shareholders investments in the company. In other words, the return on
equity ratio shows how much profit each dollar of common stockholders' equity generates.
Our company’s equity ratio shows a stability and if we compare it with the industry, it is in better
condition and compete well in the market.

Total asset turnover

Year Cherat Cement Industry
 2017 0.51 0.03
2018 0.47 0.02
2019 0.45 0.03
2020 0.52 0.02

TOTAL ASSETS TURNOVER RATIO

0.51 0.52
0.47
0.42

0.03 0.02 0.03 0.02

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
The asset turnover ratio measures the value of a company's sales or revenues relative to the value
of its assets. The asset turnover ratio can be used as an indicator of the efficiency with which a
company is using its assets to generate revenue
The company’s asset turnover ratio has a effective position in his four year tenor and as
compared to the industry its result is more efficient.

Current Ratio
Year Cherat Cement Industry
 2017 1.78 2.99
2018 1.72 2.75
2019 1.31 2.18
2020 1.12 1.91

CURRENT RATIO

2.99
2.75

2.18
1.91
1.78 1.72

1.31
1.02

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
The current liabilities refer to the business' financial obligations that are payable within a year.
Obviously, a higher current ratio is better for the business. A good current ratio is between 1.2 to
2, which means that the business has 2 times more current assets than liabilities to covers its
debts
The company’s willingness to pay is liabilities is gradually decreases and if we compare it with
the industry, it shows a stability.

Quick Ratio
Year Cherat Cement Industry
 2017 1.45 2.60
2018 1.51 2.36
2019 1.10 1.76
2020 0.85 1.53

QUICK RATIO

2.6
2.36

1.76
1.51 1.53
1.45

1.1
0.85

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
The quick ratio represents the extent to which a business can pay its short-term obligations with
its most liquid assets. In other words, it measures the proportion of a business's current liabilities
that it can meet with cash and assets that can be readily converted to cash.
the company ratio to pay its obligation is fluctuate as in first two years it has high ratio of paying
its current obligations but in next two years it slows down and as compare to industry it has the
same situation.

Absolute quick ratio

Year Cherat Cement Industry
 2017 0.02 0.79
2018 0.01 0.59
2019 0.05 0.27
2020 0.01 0.21

ABSOLUTE QUICK RATIO

2.6

0.59

0.27 0.21
0.02 0.01 0.05 0.01
YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
Absolute quick ratio is a measure of a company’s liquidity in which it is measured whether the
company has the ability to clear off debts only using the liquid assets cash and cash equivalents
such as marketable securities. It is used by creditors for determining the relative ease with which
a company can clear short term liabilities.
Our company ability is gradually decreases from year to year as it slows down and if we
compare it with the industry level the industry ratio also decreases.

Account receivable turnover ratio

Year Cherat Cement Industry
 2017 0.49 1.00
2018 0.56 0.89
2019 0.39 0.91
2020 0,31 0.70

ACCOUNT RECEVIABLE TURNOVER

0.89 0.91

0.79
0.7

0.56
0.49
0.39
0.31

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
The higher a receivable turnover ratio, the better because it means your customers pay their
invoices on time, and your company collects debts efficiently. A higher turnover ratio also
illustrates a better cash flow and a more robust balance sheet or income statement.
The company has an average ratio of receivables as it has downward trend but if we compare it
with the industry trend the industries ratio is fluctuate and the company has better position in this
case even with downward trend.

Average collection period

Year Cherat Cement Industry
 2017 7.42 16.9
2018 6.43 14.76
2019 9.33 14.01
2020 9.63 15.02

AVERAGE COLLECTION PERIOD

36.9

14.76 15.02
14.01

9.33 9.63
7.42 6.43

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
The average collection period ratio measures the average number of days clients take to pay their
bills, indicating the effectiveness of the business's credit and collection policies. 
The company’s overall performance is good as it collects it receivables on time and it increase its
credibility for collections and as compare to industry level the industry shows a downward trend.

Inventory turnover ratio

Year Cherat Cement Industry
 2017 6.46 7.21
2018 9.57 6.71
2019 7.89 6.14
2020 10.46 5.43

INVENTORY TURNOVER RATIO

10.46
9.57

7.89
7.21
6.46 6.71
6.14
5.43

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
The inventory turnover ratio is a measure of how many times the inventory is sold and replaced
over a given period. A high inventory turnover generally means that goods are sold faster and a
low turnover rate indicates weak sales and excess inventories, which may be challenging for a
business.
The company ability to inventory overall shows an upward trend which is a positive sign for our
company and if we seen the industry level it also shows upward trend but as compare to
company its credibility is less effective.

Inventory turnover in days

Year Cherat Cement Industry
2017 56 51
 2018 38 54
2019 46 59
2020 34 67

INVENTORY TURNOVER IN DAYS

67
59
56 54
51
46
38
34

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
 Inventory turnover shows how quickly a company can sell (turn over) its inventory. Meanwhile,
days of inventory looks at the average time a company can turn its inventory into sales.
The company’s turnover shows fluctuation as its effectiveness is decreases but if we seen the
industry turnover is gradually increases means the industry sells many times as compare to
company.

Payble turnover ratio

Year Cherat Cement Industry
2017 0.53 1.09
2018 0.85 1.15
 2019 0.93 1.27
2020 1,15 1.34

PAYABLE TURNOVER

1.34
1.27
1.15 1.15
1
0.93
0.85

0.53

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
 Accounts payable are short-term debt that a company owes to its suppliers and creditors. The
accounts payable turnover ratio shows how efficient a company is at paying its suppliers and
short-term debts.  Essentially, a high accounts payable turnover ratio indicates high
creditworthiness
The company’s creditworthiness of payable is increases from year to year and the industry also
shows the same trend but as compare to industry the company has less effectiveness to pay. Its
payables.

Payable turnoverin days

Year Cherat Cement Industry
2017 67 93
2018 43 87
2019 39 76
 2020 31 57

PAYABLE TURNOVER IN DAYS

93
87

76
67
57

43
39
31

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
The accounts payable turnover in days shows the average number of days that a payable remains
unpaid.  Generally, having a high DPO is advantageous, because it means that the company has
extra cash on hand that could be used for short-term investments.
In the beginning the company payable ratio is high but as the time passes it decreases gradually
an the industry has also same situation its creditworthiness also decreases but as compare to the
company it has high ratio of payable turnover.

Operating cycle
Year Cherat Cement Industry
2017 63 51
2018 44 54
2019 55 59
 2020 34 67

OPERATING CYCLE

67
63
59
54 55
51
44

34

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
An Operating Cycle refers to the days required for a business to receive inventory, sell the
inventory, and collect cash from the sale of the inventory. This cycle plays a major role
in determining the efficiency of a business. A long business operating cycle means it takes longer
time for a company to turn purchases into cash through sales. In general, the shorter the cycle,
the better a company is.
The company’s ability of operating is fluctuated within these four years and the industry also
face the same situation but as a comparison the industry has longer time of operating cycle.

Cash conversion cycle

Year Cherat Cement Industry
2017 63 50
2018 43 54
2019 54 59
2020 33 66
 CASH CONVERSION CYCLE
66
63
59
54 54
50
43

33

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT INDUSTRY

Analysis
The Cash Conversion Cycle is a metric that shows the amount of time it takes a company to
convert its investments in inventory to cash. The conversion cycle formula measures the amount
of time, in days, it takes for a company to turn its resource inputs into cash.
Both the company and industry fluctuate as it shows that both of them has a good ratio of
conversion. The industry as compare to company has high creditworthiness.

Price earnings ratio

Year Cherat Cement
2017 17.75
2018 8.86
2019 3.41
2020 8,95
 CHERAT
17.75

8.86 8.95

3.41

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT

Analysis
The Price earnings ratio simply the stock price divided by the company's earnings per share for a
designated period like the past 12 months. The price/earnings ratio conveys how much investors
will pay per share for $1 of earnings.
The graph ratio of company shows the amount which is paid to earn the profit from shares and it
has ups and downs in in investing amount.

Market to book value

Year Cherat Cement
2017 3.02
2018 1.54
2019 0.47
2020 1.68
 market to book value

3.02

1.68
1.54

0.47

YEAR2017 YEAR2018 YEAR2019 YEAR2020

CHERAT

Analysis
The market-to-book ratio, also called the price to book ratio, is a valuation model used to
determine the current market value of a company derived from the stock price compared to its
book value derived from assets and liabilities. 

Company’s Du Pont analysis

Year Net profit / total Net profit / net Net sales / total
asset sale asset
2017 0.10403509 0.20284925 0.512869
2018 0.06986074 0.14818371 0.47144679
2019 0.04997 0.11112666 0.44962372
2020 0.0575031 0.11077184 0.51911292
Industry Du Pont analysis
Year Net profit / total Net profit / net Net sales / total
asset sale asset
2017 0.1110223 4.256190902 0.026084951
2018 0.0881669 3.681198672 0.023950483
2019 0.0482708 1.872387641 0.02578023
2020 0.0077388 0.374255145 0.020677562

Du pont analysis
A DuPont identity is used to analyze the different individual parts of a firms return on equity.
Using this model, investors can determine which investment is generating the most income or the
most percentage profit to the return on equity.