Quaid-i-Azam school of Management Sciences

Quaid-i-Azam University, Islamabad

Course : Financial Management (MSB-320)

Class : BSBA – V (Section B)

Project Topic : Analysis of Financial Statements (AFS)

Group members :
 CHAPTER 4: DATA ANALYSIS
DYNEA PAK LTD.
1. Horizontal/Trend Analysis

Balance Sheet (see table 3.1)

(2018 used as base year)

ASSETS

Stores and spares

These are the stores and spare parts that the company currently has in possession.

The simple reason for such a decline up to 2021 in stores and spares is many of these assets (on rent) were

given up due to less business because of COVID and the political instability but in 2022 most of the

restrictions (due to COVID) were lifted hence, the sudden increase in this asset.

Stock-in-trade

This is basically the inventory of the company.

As business was slow the company felt the need to reduce stock in hand to reduce risk of wastage but once

sales rose again, due to no restrictions and people being employed, working, and earning again the company

boosted the stock in trade.

Trade debts

Trade debts represents the accounts receivable of the company.

Most people lost jobs and salaries in the past years hence they tried to take as little loans as possible hence,

the decrease in trade debts of the company, but now that the situation is stabilizing trading loans are again

becoming a norm.

Loans and advances

These are basically the short-term loans and advance payments the company has made, these do not include

credit sales, but other short-term debts that are owed to the company.
Due to the money situation in the country i.e., recession and covid restrictions, people naturally tried their

best to avoid taking new loans and advance payments, and they paid off old loans as quickly as possible

hence, the decrease in the company’s assets.

Other receivables

These include trade deposits, prepayments, and other such items.

Exide Pakistan Ltd. was also affected greatly by the recession and situation in the country hence, it could not

make more prepayments and deposits to increase this particular asset greatly.

Taxes recoverable

This item represents the tax that the company was overcharged and now, is to be paid back.

Taxes, during the crisis in the country may have been over-charged a lot to meet the government’s tax

collection goals as Exide was one of the few companies that was still operational when many other

businesses failed, but once the situation normalized, the taxation returned to normal as well.

Cash and bank

This is the cash at hand and the money in the company’s ban account.

The company’s most liquid asset declined by a huge margin, most likely due to the inflation decreasing

peoples buying power and making batteries less of a priority, resulting in less sales and less cash inflow, as

well as the company spending money to survive during the crisis e.g., in the form of salaries, utility bill, and

rents etc.

Total Current Assets

This is a sum of all the company’s short-term assets.

The company’s current assets kept decreasing as they were being used to survive, and the company was not

able to make many advance payments or give out many loans, but now as business is booming again, they

seem to be on a path to recovery.

Fixed assets

These are assets like land, machinery, and building.

The fixed assets decreased most likely due to depreciation but the sudden increase in 2022 could be due to

inflation and price inflation rather than an actual increase in the quantity of fixed assets.

Long-term loans
This item represents the long-term loans that Exide Pakistan Ltd. is owed.

Long term loans normally decrease as their loaning period ends but in 2021 it may have increased as, in

order to stabilize after the recession period, a lot of customers and other stakeholders may not have had cash

and resorted to long term loans form the company.

Long-term deposits

These are utilities and other deposits that the company has made in advance.

These most likely saw a constant decrease due to the company spending more on survival and having less

assets to turn into long-term assets.

Assets held for sale

These are long-term assets that the company plans to sell.

This item was listed, as increased as the company had a few long-term assets (land and building) that it

wanted to sell/dispose.

Total Assets

This is the sum of all the organization’s assets.

They kept decreasing due to the unstable business environment (the pandemic and political situation) but in

2022 they increased, showing signs of recovery and further betterment in the future.

Liabilities + O.E.

T/P

These are all the debts owed by the company due to credit purchases.

These normally keep decreasing as the company pays its debts quickly but in 2020, they increased by a lot

most likely due to the low liquid assets, but since then they trade payables have continued their downward

trend.

Unclaimed dividend

These are dividends that have been announced by the company but are not yet paid or claimed.

These exist due to the shareholders not yet claiming the dividend, but when they demand it, the dividend

must be paid, and the liability is automatically eliminated.

Accrued Profit
This is basically the profit the company has earned in advance of the sale or in simple words profit from

prepayments.

In 2021 it suddenly decreased due to huge price increase and uncertainty of sales, but normally this item has

maintained an increasing trend.

Loan from a director

This item simply refers to a liability owed to a director.

This increases or decreases depending on how much the company borrows from him and how much it pays

him back at what time.

Short-term borrowings

These are short term loans taken from banking companies.

The company did try to lower them but in 2022 they saw an increase likely due to inflation and money

needed to run the business amidst the rising cost of production.

Current portion of loan

This refers to the portion of the long-term loan that must be paid in this year.

Deferred govt. grant

This refers to the portion of the deferred government grant that must be paid in this year.

SBP payment

This refers to the portion of the SBP payment that must be paid in this year.

Total Current Liabilities

The sum of all the liabilities that must be paid within the year/accounting period.

Long-term liabilities

These include all long-term loans.

These decreased because the company first paid off all existing loans. Then it borrowed again, and the loan

increased in the 3 years following 2019.

Accumulated profit

This item refers to the retained earnings that remain after the dividends are paid.

These decreased due to continuously decreasing profits (often net loss)

Revaluation surplus
This is the increase or decrease in the value of the capital assets of the company when they are re-assessed at

the end of the accounting period.

The revaluation may have increased in 2020 due to inflation in the real estate market but other than that it

has shown a depreciating trend.

2. Vertical Analysis

Balance Sheet (see table 4.1)

Assets:

In the assets section, throughout the 5 years, the bulk of the assets are made up of the stock-in-trade

(inventory), the trade debts (accounts receivable) and the fixed assets while other items take up a small

percentage of the total assets.

Liabilities:

The financing sides is mostly made of short-term borrowings and trade payables for liabilities and revenue

reserves for the owner equity hence, other items take only a comparatively small portion of the financing

side.

3. Horizontal/Trend Analysis

Income Statement (see table 3.2)

Sales

Sales have showed a decreasing trend till 2020 but since then they have started increasing each year, the

increase may be changing each year, but it is indicating an upward trend, likely due to stabilizing conditions

I.e., no more lockdowns etc.

Cost of Sales

This is item directly related to sales, hence, it changed almost proportionately to the change in sales each

year.

Gross Profit
 This is a number directly derived from sales and COS hence it has change according to those 2 items

throughout the years.

Selling and distribution expenses

These expenses increase in 2019 but then they kept decreasing for 2 years before increasing by a large

proportion in 2022. The reason for this could be the lockdowns where less batteries were sold and distributed

and once the restrictions were lifted a lot of products had to be distributed in a short period of time which

increased costs.

Administration and general expenses

These expenses did decrease by a small percentage in 2020, likely due to laying off some of the workforce,

but before and after that, it has maintained an upward trend, due to both, Increasing production and inflation

(COS).

Other Income

This item maintained an upward trend up to 2020 but since, it has had a decreasing percentage.

Other operating charges

Other than then the 2 years (2020 and 2021) these have maintained an upward trend likely due to more

doubtful debts, bad debts, employee welfare costs and other such increasing expenses.

Finance Cost

This item has maintained an upward trend except the year 2021, because the company has lower liabilities in

that year hence, it paid less cost of finance.

Penalty

This is a one-time, unusual expense which was most likely a punishment for some form of misconduct by

the company.

Taxation

Despite lower profit, taxation maintained an upward trend, which may have been caused by the government

imposing a higher percentage of tax on the company due to the economy’s condition.

4. Vertical Analysis

Income Statement (see table 4.2)

 This whole section is a part of the Ration analysis hence, it is not written on its own.

5. Ratio Analysis (see table 5)

Inventory turnover

Definition: it is the number of times a company has sold and restocked its inventory.

Formula = Cost of goods sold/average inventory

Data from 2018 to 2022 = 5.43 4.37 4.64 4.26 4.11

Average = 4.562

In this case the turnover in 2018 was high but after that it has been fluctuating between high and low 4.00,

recently going dangerously close to the lower end meaning less inventory is being sold. The main reason for

this could be the inflation which reduces demand a while also increasing the products price.

Average age of inventory

Definition: it is the average number of days it takes a firm to sell all its inventory.

Formula = 365/inventory turnover

Data from 2018 to 2022 = 67.22 83.52 78.66 85.68 88.81

Average = 80.78

The age of inventory, with a decrease in only 2020 has been increasing which is a bad sign as it means, it is

taking longer to sell a set amount of good, which ultimately means less sales in the same period of time. This

may be due to the lower purchasing power of consumers.

Total asset turnover

Definition: it is a ratio of total sales to average assets.

Formula = net sales/average total assets

Data from 2018 to 2022 = 138.65 111.13 104.20 152.86 167.89

Average = 134.96

The ratio was initially decreasing but it has taken a sudden jump that indicates better performance which it

will hopefully maintain as it did for 2 years now. This is likely due to the stabilizing situation in the country,

which is allowing better efficiency for the company.

Current Ratio

Definition: it basically measures a company’s ability to pay short-term debts.

Formula = Current assets/current liabilities

Data from 2018 to 2022 = 1.57 1.47 1.61 1.74 1.55

Average = 1.59

The company’s current ratio has fluctuated quite a lot, but other than 2019, it has stayed between 1.5 and 2

which is considered a good current ratio and means that the company can pay off all its short-term debts.

The reason for this is that while the current assets of the company have been decreasing, the current

liabilities have been decreasing as well hence, maintaining the current ratio.

Quick Ratio

Definition: this ratio tells how well a company can pay off its short-term debts using only its most liquid

assets.

Formula = Cash & equivalents+accounts receivable/current liaibilities

Data from 2018 to 2022 = 1.08 1.01 1.18 0.98 0.79

Average = 1.01

The company’s quick ratio has fallen below 1 in recent years which is not a good thing. This is likely

because while the company does have current assets (as seen in the current ratio), it is short on the most

liquid assets i.e., cash and cash equivalents.

Debt ratio

Definition: this ratio represents the total debt of a company as a portion/percentage of the company’s total

assets.

Formula = total debt/total assets

Data from 2018 to 2022 = 51.68 55.81 54.56 50.30 55.17

Average = 53.50

The debt ratio has remained around 50 to 55 indicating that this percentage of the company’s assets are

financed by debts which is not a good sign. This may be because the company has a lot of unissued shares

and relies more on borrowing then sharing ownership.

Debt/equity ratio
Definition: this ratio measures the company’s debt relative to the original investment and retained earnings.

Formula = total liabilities/stockholder's equity

Data from 2018 to 2022 = 106.95 126.30 120.08 101.23 123.06

Average = 115.52

The ratio, while fluctuating, has remained close to, but above one, indicating more debt than equity. Likely

because the company prefers debt over shared ownership.

Gross profit margin

Definition: it is the gross profit as a percentage of the sales.

Formula = gross profit/net sales

Data from 2018 to 2022 = 11.03 10.22 8.34 9.97 11.46

Average = 10.20

The gross profit margin of the company has remained around 10%. While the consistency is a good thing,

10% is a low GPM and this is due to high cost of sales.

Profit margin

Definition: this ratio simply shows the net income of an organization as a percentage of the net sales.

Formula = net income/net sales

Data from 2018 to 2022 = 0.18 -5.31 -6.41 0.00 0.20

Average = -2.27

The NPM of the company has remained very low and even negative resulting loss. This is mainly due to

very high costs and low operating and gross profits.

Return on total assets

Definition: it indicates the profit relative to the company’s total assets.

Formula = net income/average total assets

Data from 2018 to 2022 = 0.24 -5.90 -6.68 0.00 0.34

Average = -2.40

The ROA is very low and has been negative, representing losses. This is likely due to having a lot of assets

being used inefficiently where they can’t generate any profit.

Return on equity
Definition: this ratio indicates the net profit in relation to the shareholder’s equity.

Formula = net income/common equity

Data from 2018 to 2022 = 0.50 -13.34 -14.69 0.00 0.75

Average = -5.36

the return on equity of Exide Pakistan Ltd. is extremely low and the average is negative, indicating a loss on

equity. This is due to consecutive net losses rather than profits for 3 years while the investment and

shareholder’s equity remained constant and even increased.

Earnings per share

Definition: this is a ratio of the company’s earnings relative to the number of outstanding shares.

Formula = Net Income-preferred dividends/common stock outstanding

Data from 2018 to 2022 = 2.78 -64.94 -71.94 -0.01 3.72

Average = -26.08

The average is negative and the two years it is positive, the EPS has been very low. The number of

outstanding shares has remained constant so the reason for this ratio is the low profits and losses.

Price/earnings ratio

Definition: it is the ratio of a shares price to its earning.

Formula = Market price per share/earnings per share

Data from 2018 to 2022 = 229.23 -4.37 -2.48 -58578.61 98.73

Average = -11651.50

This ratio is either negative or very high, meaning the company is losing money and when it does earn, it

requires a very high investment per share. The reason for this is the high cost which leads to less profit and

ultimately a very high or negative price/earnings ratio.

 Atlas Battery Ltd. Balance Sheet

1. Horizontal/Trend Analysis

Balance sheet (see table 3.3)

(2018 as base year)

Fixed Assets:

Depreciation most certainly caused the fixed assets to decline, but inflation and price inflation may have

caused the sudden increase in 2022 rather than a rise in the total amount of fixed assets.

Property, plant and equipment

These are long term asset of the company that they have life more than one year. And also We can check

that the long term asset of the company increases from it base year because due to CVOID 19 company

faced critical situation even in those year company faced loss. But after the COVID 19 session company

come to his normal routine an earn huge profit and they invest in long term asset.

Long term loans;

these are the long term loan that owed by Atlas Battery ltd.

Long-term loans typically decline when the loaning period comes to an end, but in 2021 they may have

climbed since many customers and other stakeholders may not have had enough cash to stabilize after the

recession period and instead turned to long-term loans from the company.

Long-term deposits;

These are deposits that the business has already paid for utilities and other services.
Due to the corporation spending more on survival and having less assets to develop into long- term assets,

they most likely suffered a steady decline.

Current assets;

Stores, spares and loose tools;

The company currently has these stores and spare parts.

The simple explanation for this decline in stores and spares up until 2021 is that many of these assets (on

rent) were abandoned due to lower business due to COVID and the political unrest, but in 2022 most of the

restrictions (due to COVID) were lifted, leading to the unexpected increase in this asset.

Stock-in-trade;

This essentially represents the company's inventory.

When business was slow, the company felt the need to lower its stock on hand to lower the risk of wastage.

However, as business picked up again, thanks to the removal of limitations and more people finding jobs and

earning money again, the company increased its stock in trade.

Trade debts;

The company's accounts receivable are represented by trade debts.

The majority of individuals lost their jobs and wages in the previous years, so they made an effort to take out

as few loans as possible, which led to a fall in the company's trade debts. However, now that things are

beginning to stabilize, trading loans are returning to the norm.

Loans and advances;

These are essentially the short-term advances and loans that the business has made; credit sales are not

included here, but there are other short-term debts that the business is due.

People naturally did their best to avoid taking out new loans and advance payments as a result of the

country's financial situation—namely, the recession and COVID restrictions—and they paid off existing

debts as quickly as they could, which led to a decline in the company's assets.

Deposits and prepayments;

Any payment that company paid in advance is consider as prepayment.

Due COVID company was unstable but after the recovery of COVID they able to made prepayment of the

company.
Other receivables;

These include trade deposits and other such items.

Atlas Battery Ltd. was also affected greatly by the recession and situation in the country hence, it could not

make more deposits to increase this particular asset greatly.

Sales tax receivable – net

Bank balances:

The money in the company’s ban account.

The company’s most liquid asset declined by a huge margin, most likely due to the inflation decreasing

peoples buying power and making batteries less of a priority, resulting in less sales and less cash inflow, as

well as the company spending money to survive during the crisis e.g., in the form of salaries, utility bill, and

rents etc.

Total Current Assets:

This is a sum of all the company’s short-term assets.

The company’s current assets kept decreasing as they were being used to survive, and the company was not

able to make many advance payments or give out many loans, but now as business is booming again, they

seem to be on a path to recovery.

Total Assets:

This is the sum of all the organization’s assets.

They kept decreasing due to the unstable business environment (the pandemic and political situation) but in

2022 they increased, showing signs of recovery and further betterment in the future.

Liabilities+O.E.

Staff Retirement Benefits:

Retirement and pension benefits are given to a retired company official to make sure that they have a

constant income and a secured life.

The staff retirement benefits of the company decrease because the uncertainty situation of the company in

COVID session but after the recovery of COVID it increases.

Deferred taxation:
The amount of income tax payable in future periods in respect of taxable temporary differences.

Unfortunately, it was all time in minus digits because of net income and profit.

Total long-term liabilities:

These include all long-term loans.

These decreased because the company first paid off all existing loans. Then it borrowed again and the loan

increased in the 3 years following 2019.

Trade and other payables:

These normally keep decreasing as the company pays its debts quickly but in 2020 they increased by a lot

most likely due to the low liquid assets, but since then they trade payables have continued their downward

trend.

Accrued mark-up:

This is basically the profit the company has earned in advance of the sale or in simple words profit from

prepayments.

In 2021 it suddenly decreased due to huge price increase and uncertainty of sales, but normally this item has

maintained an increasing trend.

Short term borrowings:

These are rapid loans provided by the financial institutions.

The business made an effort to reduce them, but in 2022 they witnessed an increase that was probably

caused by inflation and the necessity for cash to maintain the business in the face of rising manufacturing

costs.

Unclaimed dividend:

These are dividends that have been announced by the company but are not yet paid or claimed.

These exist due to the shareholders not yet claiming the dividend, but when they demand it, the dividend has

to be paid and the liability is automatically eliminated.

Total Current Liabilities

The sum of all the liabilities that must be paid within the year/accounting period.

2. Vertical Analysis
 Balance sheet (see table 4.3)

Assets:

In the assets section, Inventory, trade debts (accounts receivable), and fixed assets make up the majority of

the assets during the course of the five years, with other things making up a minor portion of the total assets.

Liabilities:

The majority of the financing side's components are short-term borrowings, trade payables for liabilities, and

revenue reserves for owner equity; as a result, other elements make up a relatively small proportion of the

financing side.

3. Horizontal/Trend Analysis

Income Statement (see table 3.4)

Sales:

Sales had a declining pattern up until 2020, but after that, they began to rise gradually each year. This rising

trend is probably the result of conditions normalizing, such as the ending of lockdowns and other disruptive

events.

Cost of Sales:

This is item directly related to sales, hence, it changed almost proportionately to the change in sales each

year.

Gross Profit:

This is a number directly derived from sales and COS hence it has change according to those 2 items

throughout the years.

Distribution cost:

These expenses increase in 2019 but then they kept decreasing for 2 years before increasing by a large

proportion in 2022. The reason for this could be the lockdowns where less batteries

were sold and distributed and once the restrictions were lifted a lot of products had to be distributed in a

short period of time which increased costs.

Administrative cost:
These expenses did decrease by a small percentage in 2020, likely due to laying off some of the workforce,

but before and after that, it has maintained an upward trend, due to both, Increasing production and inflation

(COS).

Other Income:

This item maintained an upward trend up to 2020 but since, it has had a decreasing percentage.

Profit/Loss from Operation:

Other than then the 2 years (2020 and 2021) these have maintained an upward trend likely due to more

doubtful debts, bad debts, employee welfare costs and other such increasing expenses.

Finance cost:

This item has maintained an upward trend except the year 2021, because the company has lower liabilities in

that year hence, it paid less cost of finance.

Profit before taxation:

Despite lower profit, taxation maintained an upward trend, which my have been caused by the government

imposing a higher percentage of tax on the company due to the economy’s condition.

4. Ratio Analysis

(see table 5.2)

Total asset turnover

Definition: it is a ratio of total sales to average assets.

Formula = net sales/average total assets

Data from 2018 to 2022 = 2.40 2.30 1.60 1.40 2.00

The ratio was initially good but it has taken a sudden jump back that indicates better weak performance but

in the year of 2022 was fair good and it will hopefully maintain as it did for 2 years now. This is likely due

to the stabilizing situation in the country, which is allowing better efficiency for the company.

Current Ratio

Definition: it basically measures a company’s ability to pay short-term debts.

Formula = Current assets/current liabilities

Data from 2018 to 2022 = 1.70 1.80 2.20 1.60 1.60

The company’s current ratio has fluctuated quite a lot, but other than 2020, it has stayed between 2.20 and 3

which is considered a good current ratio and means that the company can pay off all its short-term debts.

The reason for this is that while the current assets of the company have been decreasing, the current

liabilities have been decreasing as well hence, maintaining the current ratio.

Quick Ratio

Definition: this ratio tells how well a company can pay off its short-term debts using only its most liquid

assets.

Formula = Cash & equivalents + accounts receivable/current liaibilities

Data from 2018 to 2022 = 0.40 0.50 0.90 0.90 0.90

The company’s quick ratio has fallen below 1 in 5 years which is not a good thing. This is likely because

while the company does have current assets (as seen in the current ratio), it is short on the most liquid assets

i.e., cash and cash equivalents.

Gross profit margin

Definition: it is the gross profit as a percentage of the sales.

Formula = gross profit/net sales

Data from 2018 to 2022 = 10.90 11.40 7.00 2.10 10.90

The gross profit margin of the company has remained around 10%. While the consistency is a good thing,

but in 2021 below 3, it happens due to high cost of sales.

Profit margin

Definition: this is simply the net profit as a percentage of sales.

Formula = net income/net sales

Data from 2018 to 2022 = 2.70 4.40 -2.60 -4.60 3.30

The NPM of the company has remained very low and even negative resulting loss. This is mainly due to

very high costs and low operating and gross profits.

Return on total assets

Definition: it indicates the profit relative to the company’s total assets.

Formula = net income/average total assets

Data from 2018 to 2022 = 6.40 9.10 -4.20 -7.20 5.80

The ROA is very low and has been negative, representing losses. This is likely due to having a lot of assets

being used inefficiently where they can’t generate any profit.

Earnings per share

Definition: this is a ratio of the company’s earnings relative to the number of outstanding shares.

Formula = Net Income-preferred dividends/common stock outstanding

Data from 2018 to 2022 = 24.61 31.98 -13.43 24.32 24.24

In this one years is negative and the two years it is positive; the EPS has been very low. The number of

outstanding shares has remained constant so the reason for this ratio is the low profits and losses.

Price/earnings ratio

Definition: it is the ratio of a shares price to its earning.

Formula = Market price per share/earnings per share

Data from 2018 to 2022 = 7.00 8.60 -12.50 3.90 12.10

This ratio is either negative or very high, meaning the company is losing money and when it does earn, it

requires a very high investment per share. The reason for this is the high cost which leads to less profit and

ultimately a very high or negative price/earnings ratio.

 Agriauto Pakistan Ltd.

1. Horizontal/Vertical Analysis

Balance Sheet (see table 3.5 for horizontal analysis)

(see table 4.5 for vertical analysis)

(2018 used as base year)

Assets

Fixed assets

They are carried at cost less accumulated depreciation and any impairment losses, except for land owned by

recognized at cost less impairment. These Fixed assets includes Intangible assets which are carried at cost

less accumulated amortization and any impairment losses. Over the Past 5 years the assets have increased

from 1,605,709 000 to 2,500,629 000 which we can see in the balance sheet. The change can also be seen in

the Horizontal and vertical analysis. In Horizontal analysis we can see an increase from -23.88% in 2019 to

-6.00% in 2022. And vertical analysis change can be noticed as in the 2018 it was 101.32% and by the time

2022 it was 202.38%.

CURRENT ASSETS

Current assets on the balance sheet include cash, cash equivalents, short-term investments and other assets

that can be converted into cash quickly - in 12 months or less. Because these assets can be easily converted

into cash, they are sometimes referred to as "liquid assets". Over the Past 5 years the Current assets has

increased from 3,709,267 000 to 4,194,910 000 which we can see in the balance sheet. The change can also

be seen in the Horizontal and vertical analysis. In Horizontal analysis we can see an increase from -7.99% in
2019 to -17.24% in 2022. And vertical analysis change can be noticed as in the 2018 it was 234.05% and

by the time 2022 it was 339.51%. There was a big of a change because during 2019 there wasn’t much of an

increase due to covid.

Total Assets:

The balance sheet is calculated by balancing the company's assets against its liabilities and equity. The

formula is as follows: total assets = total liabilities + total equity. Total assets are calculated as the sum of all

short-term, long-term, and other assets. Over the Past 5 years the total assets have increased from Rs.

5,314,976 000 to 6,695,539 000 which we can see in the balance sheet. The change can also be seen in the

Horizontal and vertical analysis. In Horizontal analysis we can see an increase from -13.45% in 2019 to

6.32% in 2022. And vertical analysis change can be noticed as in the 2018 it was 335.37% and by the time

2022 it was 541.89%.

Total Equity:

Equity is the sum of assets less the sum of liabilities. All these numbers can be found in the company's

balance sheet for the company. Over the Past 5 years the Total Equity has decreased from 4,700,680

000 to 4,521,207 000 which we can see in the balance sheet this was because the paid-up capital Reserves

Was used over the years mostly would have been used to finance the purchase of assets. The change can also

be seen in the Horizontal and vertical analysis. In Horizontal analysis we can see change from -13.34%

In 2019 to 27.64% in 2022. And vertical analysis change can be noticed as in the 2018 it was 2712.09%

and by the time 2022 it was 2260.60%

Liabilities:

Liabilities are debts that the company owes to third party creditors. Notes to be paid and bank debt may be

part of the liabilities. Companies borrow to grow faster. The balance between a company's debts and its

assets makes it stable. Can see too that over the time the liabilities have also increased over the time and this

change is due to the facts that the new assets purchased were financed through these liabilities.

TOTAL EQUITY AND LIABILITIES

Total Equity and liability is the sum of all the equity and liabilities that are equal to the Asset side. Over the

Past 5 years the total assets have increased from Rs. 5,314,976 000 to 6,695,539 000 which we can see in the

balance sheet. The change can also be seen in the Horizontal and vertical analysis. In Horizontal analysis we
can see an increase from -13.45% in 2019 to 6.32% in 2022. And vertical analysis change can be noticed as

in the 2018 it was 2657.49% and by the time 2022 it was 3347.77%

2. Horizontal/Vertical Analysis

Income statement (see table 3.6 for horizontal analysis)

(see table 4.6 for vertical analysis)

(2018 used as base year)

Gross profit

It is calculated by subtracting direct costs or cost of goods sold from net. This number is divided by net

revenue and then multiplied by 100% to calculate the gross margin ratio. We can see a fluctuation in Gross

Profit over the last five year in 2018 the Gross profit was Rs. 1,592 200 000 however in 2020 the Gross

profit fall to Rs. 251 466 000 however this was then covered in the coming years 2022 where gross profit

was maintained back to Rs.1 018 464 000, yet not as much as it was back in 2018 but the company is trying

to increase gross profit. This drop was Due to Covid where sales were dropped due to lock down. This

Change could also be noticed in Horizontal analysis where we can see in 2019 the ratio changed from -

5.29% to -58.29% over the time.

Operating profit

Operating income is the total income a company earns from sales after paying off all operating expenses

such as rent, employee salaries, equipment and inventory costs. Operating income does not include interest,

tax and investment gains or losses. We can see a fluctuation in operating Profit too over the last five year in

2018 the operating profit was Rs. 1 239 064 000 however in 2020 the operating profit fall to Rs. -71102 000

however this was then covered in the coming years 2022 where operating profit was maintained back to Rs.

642907 000, yet not as much as it was back in 2018 but the company is trying to increase operating profit.

This drop was Due to Covid where sales were dropped due to lock down.

Net Profit/Loss after Taxation

Net income is the amount of money your business makes after deducting all operating, interest, and tax

expenses over a given period of time. To get this value, you need to know the company's gross margin. If the
value of net profit is negative, then it is called net loss. We can see a fluctuation in net Profit over the last

five year in 2018 the net profit was Rs. 959717 000

however, in 2020 the net profit fall to Rs -108438 000 however this was then covered in the coming years

2022 where net profit was maintained back to Rs. 30 4009 000, yet not as much as it was back in 2018 but

the company is trying to increase net profit. This drop was Due to Covid where sales were dropped due to

lock down.

3. Ratio Analysis.

(see table 5.3)

Inventory turnover

Definition: it is the number of times a company has sold and restocked its inventory.

Formula = Cost of goods sold/average inventory

Data from 2022 to 2018 = 4.03 6.59 2.72 6.56 6.34

In this case the turnover in 2018 was high but after that it has been fluctuating between high and low,

recently going dangerously close to the lower end meaning less inventory is being sold. The main reason for

this could be the inflation which reduces demand a while also increasing the products price.

Total asset turnover

Definition: it is a ratio of total sales to average assets.

Formula = net sales/average total assets

Data from 2018 to 2022 = 133.78 128.86 80.49 152.55 140.53

The ratio was initially decreasing but it has taken a sudden jump that indicates better performance which it

will hopefully maintain as it did for 2 years now. This is likely due to the stabilizing situation in the country,

which is allowing better efficiency for the company.

Current Ratio

Definition: it basically measures a company’s ability to pay short-term debts.

Formula = Current assets/current liabilities

Data from 2022 to 2018 = 1.99 3.22 3.3 5.24 5.46

The company’s current ratio has fallen quite a lot, over the time in recent year it has stayed between 1.99 to

1 which is considered a good current ratio and means that the company can pay off all its short-term debts.

The reason for this is that while the current assets of the company have been decreasing, the current

liabilities have been decreasing as well hence, maintaining the current ratio.

Quick Ratio

Definition: this ratio tells how well a company can pay off its short-term debts using only its most liquid

assets.

Formula = Cash & equivalents+accounts receivable/current liaibilities

Data from 2022 to 2018 = 0.94 2.17 1.48 3.15 3.37

The company’s quick ratio has fallen below 1 in recent years which is not a good thing. This is likely

because while the company does have current assets (as seen in the current ratio), it is short on the most

liquid assets i.e., cash and cash equivalents.

Debt ratio

Definition: this ratio measures the total debt of a company as a percentage of its total assets.

Formula = total debt/total assets

Data from 2022 to 2018 = 113.39 32.16 46.52 9.84 -0.43

The debt ratio has shoot to 113.39 indicating that this percentage of the company’s assets are financed by

debts which is not a good sign. This may be because the company has a lot of unused assets as comparison

to Debts

Debt/equity ratio

Definition: this ratio measures the company’s debt relative to the original investment and retained earnings.

Formula = total liabilities/stockholder's equity

Data from 2022 to 2018 = 48.09 23.21 19.71 12.7 12.38

The ratio has remained higher indicating more debt than equity. Likely because the company prefers debt

over shared ownership.

Gross profit margin

Definition: it is the gross profit as a percentage of the sales.

Formula = gross profit/net sales

Data from 2022 to 2018 = 11.37 13.44 4.51 15.14 18.25

The gross profit margin of the company has fall over the time. As we could see after covid now the company

has started to recover.

Profit margin

Definition: this is simply the net profit as a percentage of sales.

Formula = net income/net sales

Data from 2022 to 2018 = 3.39 9.35 -0.79 8.47 8.51

The NPM of the company has remained very low and even negative resulting loss. This is mainly due to

very high costs and low operating and gross profits.

Return on equity

Definition: this ratio indicates the net profit in relation to the shareholder’s equity.

Formula = net income/common equity

Data from 2022 to 2018 = 6.72 14.84 -0.76 14.56 13.44

The return on equity of the company is low indicating a loss on equity too in 2020. This is due to net losses

rather than profits while the investment and shareholder’s equity remained constant and even increased.

Earnings per share

Definition: this is a ratio of the company’s earnings relative to the number of outstanding shares.

Formula = Net Income-preferred dividends/common stock outstanding

Data from 2022 to 2018 = 8.44 22.62 -1.03 20.94 18.07

The EPS has been low. The number of outstanding shares has remained constant so the reason for this ratio

is the low profits and losses.

Price/earnings ratio

Definition: it is the ratio of a shares price to its earning.

Formula = Market price per share/earnings per share

Data from 2022 to 2018 = 23.96 10.08 -171.02 10.78 18.42

This ratio is high, meaning the company is losing money or when it does earn, it requires a very high

investment per share. The reason for this is the high cost which leads to less profit and ultimately a very high

or negative price/earnings ratio.