Q5

There is an inverse relationship between the rate of dividends paid out and the growth rate of the
company’s stock. When the dividend payout ratio increases, the capital gains on stock fall. The dividend
policy of Fauji Fertilizers is influenced by several variables, including future prospects, operating
spending plans, financial outcomes, and other variables that represent the company's future goals.
however, starting in FY18–2019, Fauji Fertilizers increased its dividend by 140.32%, However Due to the
pandemic, There was a sharp decrease in the dividend payout from 2019 to 2020. The payout ratio of
other companies, such Engro, was higher than Fauji’s. In 2017, it paid dividends equal to 95% of
net income, and in 2019 and 2021, when the ratios were 102% and 105%, respectively, it even
paid dividends greater than net income. In this instance, Fauji is relatively a smaller payer of
dividends from net income. Nearly over 60% of these earnings are paid out as dividends by
Fauji. The company needs to take out short-term loans to pay dividends and maintain its
competitiveness in the stock market due to short-term cash flow concerns. The market's
instability caused by the depreciation of the rupee and the nation's political unrest were major
obstacles that decreased earnings and, consequently, dividends. It is reasonable to conclude that
Fauji fertilizer's dividend is comparable to that of companies like Engro fertilizers and Fatima fertilizers
when compared to other companies. This is largely because to the management's sound policies and
efforts to keep costs in check, which have enabled Fauji Fertilizers to provide dividends competitive with
those of its rivals, luring many potential investors to the company.

Q2;

Engro fertilizers is main rival of Fauji Fertilizers, but the capital structures of the two businesses differ
slightly. Fauji Fertilizers utilizes more equity and less debt to finance its assets, as indicated by its
capital/debt ratio. With the exception of 2021, a minor downward trend in Fauji Fertilizers debt
percentage has been seen since 2018.
The data shows that durin the 5 years FY 2017-2021, Debt to equity ratio was 80.5% whereas WACC
calculated was 88.5%. Since WACC was lowest for the year 2018 the capital structure was closest to
optimal. This shows that Fauji fertilizer is more financed by debt in 2021, The debt-to-equity ratio is
71.0% which means that the firm should increase its debt financing. The market value for the year
 capital structure - fauji
1.200
1.000
0.800
0.600
0.400
0.200
0.000
2017 2018 2019 2020 2021

debt/capital (Wd) equity/capital (Ws)

The two graphs above compare the capital structures of Engro and Fauji. Due to its short-term
obligations, the market leader Fauji has a higher debt proportion in 2021 than engro. In order to finance
the manufacturing of extra urea while the market was rebuilding post-covid, the company took out
short-term loans.
There is an inverse relationship between the rate of dividends paid out and the growth rate of the
company’s stock. When the dividend payout ratio increases, the capital gains on stock fall. The dividend
policy of Fauji Fertilizers is influenced by several variables, including future prospects, operating
spending plans, financial outcomes, and other variables that represent the company's future goals.
however, starting in FY18–2019, Fauji Fertilizers increased its dividend by 140.32%, However Due to the
pandemic, There was a sharp decrease in the dividend payout from 2019 to 2020. The payout ratio of
other companies, such Engro, was higher than Fauji’s. In 2017, it paid dividends equal to 95% of
net income, and in 2019 and 2021, when the ratios were 102% and 105%, respectively, it even
paid dividends greater than net income. In this instance, Fauji is relatively a smaller payer of
dividends from net income. Nearly over 60% of these earnings are paid out as dividends by
Fauji. The company needs to take out short-term loans to pay dividends and maintain its
competitiveness in the stock market due to short-term cash flow concerns. The market's
instability caused by the depreciation of the rupee and the nation's political unrest were major
obstacles that decreased earnings and, consequently, dividends. It is reasonable to conclude that
Fauji fertilizer's dividend is comparable to that of companies like Engro fertilizers and Fatima fertilizers
when compared to other companies. This is largely because to the management's sound policies and
efforts to keep costs in check, which have enabled Fauji Fertilizers to provide dividends competitive with
those of its rivals, luring many potential investors to the company.