NATIONAL UNIVERSITY OF MODERN

LANGUAGES DEPARTMENT OF MANAGEMENT

SCIENCES LAHORE CAMPUS

CLASS: BS A & F (5)

DATE: 13-12-2023

SUBMITTED BY:

Jahnzaib khan LF 1184

Ali hamza LF 1180

Syed Ali Abbas LF 1189

SUBMITTED TO:

Maam Hina Shoukat

TOPIC:

Financial Analysis of Sui Northern Gas Pipelines Limited

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 Sui Northern Gas Pipelines Limited

Sui Northern Gas Pipelines Limited (SNGPL) was incorporated as a private limited Company in 1963 and
later converted into a public limited company in January 1964 under the Indian Companies Act 1913 of British
India, now The Companies Act 2017 of Pakistan, and is listed on the Pakistan Stock Exchange.SNGPL is the
largest integrated gas company serving more than 7.22 million consumers in North Central Pakistan through an
extensive network in Punjab, Khyber Pakhtunkhwa and Azad Jammu & Kashmir. Main Transmissions regions
of SNGPL are Faisalabad, Lahore, Multan, and Wah. The maximum diameter used in transmission Pipelines is
round about 42 inches. Company has 16 distribution regions.SNGPL takes gas in 2 ways. The first one is
'System Gas' and the second is 'RLNG'. In the case of System Gas, the gas obtained from local resources is
about 750-800 mmcd. While in the case of RLNG (Re-gasified Liquified Natural gas), we import gas from
foreign countries in the form of liquid in a closed container. Then we re-gasify it and convert this liquid into
gas. Its quantity is about 100 mmcd. The Company took over the existing Sui-Multan System with 217 miles
(349 km) of 16 inches (410 mm) and 80 miles (130 km) of 10 inches (250 mm) diameter pipelines from
Pakistan Industrial Development Corporation (PIDC) and Dhulian-Rawalpindi-Wah system with 82 miles (132
km) of 6 inches (150 mm) diameter pipeline from Attock Oil Company. The Company's commercial
operations commenced by selling an average of 1.3 million cubic metres (47 million cubic feet) per day gas in
two regions viz. Multan and Rawalpindi.

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 Type Public
Traded as PSX: SNGP
Industry Oil & Gas
Founded 1963
Headquarters Head Office in Lahore, Pakistan
Area served Punjab, Khyber Pakhtunkhwa, Azad Kashmir & Islamabad
Key people Amer Tufail (CEO)
Products Natural Gas Transmission & Distribution
Revenue Rs. 1.29 trillion (US$4.5 billion) (2022)
Operating Rs. 15.50 billion (US$54 million)(2022)
income
Net income Rs. 10.36 billion (US$36 million) (2022)
Total assets Rs. 1.26 trillion (US$4.4 billion) (2022)
Number of 8,488 (2022)
employees
Website www.sngpl.com.pk

Sui Northern Gas Pipelines Limited will ensure that

 The health of its employees, its consumers, its contractors and other interested parties is protected.
 All its activities are carried out safely.
 Environmental performance meets legislative requirements.
 There is continual improvement in HSE performance.

To implement HSE Policy, Sui Northern Gas Pipelines Limited will ensure

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 Compliance with relevant laws and regulations and fulfill compliance obligation.
 That for Health, Safety and Environment, the required Organization, Standards and Procedures are developed and
established.
 That all its activities are carried out in accordance with relevant international Standards and Company's Health,
Safety and Environment Standards and Procedures.
 To set demanding targets and measure progress to ensure continual improvement in Health, Safety and
Environmental performance with participation and consultation of workers at all applicable levels and functions.
 To involve its employees to exercise personal responsibility in idntifying hazards, reducing OH & S risks, in
preventing harms to himself/herself, to others and to the environment for the prevention of pollution.
 To provide appropriate Health, Safety and Environment training / information to all employees, contractors,
consumers and all relevant interested parties.
 To provide safe working environment in order to protect the employees from occupational illness and accidents.
 To promote awareness and give due recognition to performance in the area of Health, Safety and Environment.

Nothing contained in this policy will be interpreted so as to enhance the otherwise legal obligation of the
Company.

Vision:
To be the leading integrated natural gas provider in the region seeking to improve the quality of life
of our customers and achieve maximum benefit for our stakeholders by providing an uninterrupted
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 and environment friendly energy resource.

Mission:
A commitment to deliver natural gas to all doorsteps in our chosen areas through continuous
expansion of our network, by optimally employing technological, human and organizational
resources, best practices and high ethical standards

Objectives:
SNGPL is committed for:

● Enhancement of System Capacity.

● Expansion of Transmission and Distribution Network.
● Increase in Gas Sales
● Rehabilitation of Transmission and Distribution Network.
● Reduction in Unaccounted for Gas Losses.
● Improvement in Profitability.
● Improvement in Consumer Services.
● Adoption of Information Technology.
● Human Resource Development.
● Pursue Pipelines Construction and Advisory Business.

Core Values:
● COMMITMENT We are committed to our vision, mission and to creating and delivering
stakeholder value.
● COURTESY We are courteous - with our customers, stakeholders, and towards each other
and encourage open communication
● COMPETENCE We are competent and strive to continuously develop and improve our
skills and business practices.
● RESPONSIBILITY We are responsible - as individuals and as teams - for our work and
our actions. We welcome scrutiny, and we hold ourselves accountable.
● INTEGRITY We have integrity - as individuals and as teams - our decisions are
characterized by honesty and fairness

CAMELS Rating System

The CAMELS Rating System was developed in the United States as a supervisory rating system to assess a

5
bank’s overall condition. CAMELS is an acronym that represents the six factors that are considered for the
rating. Unlike other regulatory ratios or ratings, the CAMELS rating is not released to the public. It is only
used by top management to understand and regulate possible risks.

This is a camel ratios apply for Sui Northern Gas Pipelines Limited financial
statement.
Equity capital
 Capital Adequacys =----------------
Total Assets

For 2022 for 2021

39648058/1268107071 =0.0312 34220066 /918060448=0.037

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 Personnel Expenses
 Management Quality =----------------------
Averager Assets
For 2022 for 2021
2675090/56479161 =0.0473 2121511/55205548 =0.0384
NI
 Earning Quality =-----------------------
T.A
For 2022 for 2021
10366231/1268107071=0.081 10985994/918060448 =0.0119

 Return on Equity 2022 Return on Equity 2021

10366231/39648058 = 0.2614 10985994/34220066 =0.3210

 Current ratio 2022 Current Ratio 2021

1000499388/1208107071 =0.7937 665330402/918060448 =0.7247

 Cash ratio 2022 Cash ratio 2021

15793568/56479161 =0.2796 10328059/55205548 =0.1870

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 Financial Statements

1. Statement of Cash Flow:

8
2. Balance Sheet:

9
1
3. Statement of Profit & Loss:

4. Statement of Comprehensive Income:

1
5. Statement of change in Equity

Financial Analysis

● Operating Ratio:

2022 :
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠
Operating Ratio = 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑅𝑒𝑣𝑒𝑛𝑢𝑒
34,173,728
= 1,076,740,109
= 3.174%

2021:
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠
Operating Ratio = 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑅𝑒𝑣𝑒𝑛𝑢𝑒
16,486,408
= 644,504,419

1
 = 2.57%
Interpretation:
Year 2021 (2.57%):
● An operating ratio of 2.57% suggests that, for every rupee of revenue generated, the
company incurred operating expenses equivalent to 2.57 paisas.
● A lower operating ratio is generally considered favorable as it indicates efficient cost
management and a higher percentage of revenue available as operating income.
Year 2022 (3.174%):
● The increase in the operating ratio to 3.174% in 2022 indicates a higher proportion of
operating expenses relative to revenue.
● This may suggest increased operating costs or a decrease in revenue efficiency
compared to the previous year.

● Funded Debt to Operating Property:

2022:
Funded Debt = Long term Financing + Current Portion of long term Financing
= (25,450,493 + 124,214) + 6,319,414
= 31894121
𝐹𝑢𝑛𝑑𝑒𝑑 𝐷𝑒𝑏𝑡
Funded Debt to Operating Property =
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑝𝑒𝑟𝑡𝑦
31894121
= 224,937,870
= 14.18%

2021:
Funded Debt = Long term Financing + Current Portion of long term Financing
= (27,455,663 + 179,775) + 9,360,968
= 31894121
𝐹𝑢𝑛𝑑𝑒𝑑 𝐷𝑒𝑏𝑡
Funded Debt to Operating Property =
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑝𝑒𝑟𝑡𝑦
36.996,406
= 214,090,961
= 17.28%
Interpretation:
Year 2021 (17.28%):
● The ratio of 17.28% indicates that, at the end of 2021, the company had funded debt
equivalent to 17.28% of its total operating property.

1
 ● This suggests a relatively higher level of financial leverage, where a larger portion of
the company's operating property is financed through debt.
Year 2022 (14.18%):
● The decrease in the ratio to 14.18% in 2022 indicates a lower proportion of funded
debt in relation to operating property.
● This may suggest a reduction in financial leverage or a change in the composition of
the company's capital structure, with potentially less reliance on debt

● Percent earned on Operating Profit:

2022:
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
Net Income to Operating Property =
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑝𝑒𝑟𝑡𝑦
10,366,231
= 224,937,870
= 4.60%

2021:
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
Net Income to Operating Property =
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑝𝑒𝑟𝑡𝑦
10,985,994
= 214,090,961
= 5.131%
Interpretation:
Year 2021 (5.131%):
● The operating profit margin of 5.131% indicates that, for every rupee of revenue
generated in 2021, the company retained 5.131 paisa as operating profit after
covering operating expenses.
● A higher operating profit margin is generally considered favorable, as it suggests
efficient cost management and a greater percentage of revenue contributing to
operating profit.
Year 2022 (4.60%):
● The decrease in the operating profit margin to 4.60% in 2022 suggests that a lower
percentage of revenue is translating into operating profit.
● This may be due to increased operating expenses, decreased revenue efficiency, or a
combination of both.

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 ● Operating Revenue to Operating Property:

2022:
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑅𝑒𝑣𝑒𝑛𝑢𝑒
Operating Revenue to Operating Property =
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑝𝑒𝑟𝑡𝑦
1,076,740,109
= 224,937,870
= 478.63%

2021:
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑅𝑒𝑣𝑒𝑛𝑢𝑒
Operating Revenue to Operating Property =
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑝𝑒𝑟𝑡𝑦
644,504,419
= 214,090,961
= 301.04%
Interpretation:
Year 2021 (301.04%):
● The ratio of 301.04% suggests that, in 2021, the company generated operating
revenue equivalent to approximately three times its operating property.
● This may indicate effective utilization of operating assets, resulting in a relatively
high revenue yield from these assets.
Year 2022 (478.63%):
● The increase in the ratio to 478.63% in 2022 indicates a further improvement in the
efficiency of converting operating property into operating revenue.
● The company generated operating revenue equivalent to almost five times its
operating property during the year, signaling enhanced operational efficiency or
potentially increased pricing power.

Additional ratios:

● Current Ratio:
2022:
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
Current Ratio = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
1,006,499,388
= 1,028,762,141
= 97.8%
2021:

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 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
Current Ratio = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
665,330,402
= 688,037,096
= 96.7%
Interpretation:
Year 2021 (96.7%):
● A current ratio of 96.7% indicates that, at the end of 2021, the company had current
assets equivalent to 96.7% of its current liabilities.
● This suggests a relatively strong ability to meet short-term obligations using available
short-term assets.
Year 2022 (97.8%):
● The increase in the current ratio to 97.8% in 2022 indicates a further improvement in
the company's liquidity position.
● The company now has current assets equal to 97.8% of its current liabilities,
suggesting an enhanced ability to cover short-term obligations

● Working Capital Ratio:

2022:
Net working capital Ratio = Current Assets - Current Liabilities
= 1, 006, 499, 388 - 1, 028, 762, 141
= -22,262,753 PKR

2021:
Net working capital Ratio = Current Assets - Current Liabilities
= 665, 330, 402 - 688, 037, 096
= -22,706694 PKR
Interpretation:
Year 2021 (-22,706,694 PKR):
● The negative value suggests that, at the end of 2021, the company had more short-
term liabilities than short-term assets.
● This could indicate potential liquidity challenges, as the company may face difficulty
in meeting its immediate obligations with its existing current assets.
Year 2022 (-22,262,753 PKR):
● The slight improvement in the negative working capital ratio to -22,262,753 PKR in
2022 suggests a relatively better position compared to the previous year.
● However, the negative value still indicates that the company has more short-term
liabilities than short-term assets.

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 ● Acid-Test Ratio:

2022:
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝑆𝑡𝑜𝑐𝑘 𝑖𝑛 𝑇𝑟𝑎𝑑𝑒(𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦)
Acid Test Ratio = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
1,006,499,388 −12,496,985
= 1,028,762,141
= 0.9662 times
2021:
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝑆𝑡𝑜𝑐𝑘 𝑖𝑛 𝑇𝑟𝑎𝑑𝑒(𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦)
Acid Test Ratio = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
665,330,402 − 4,680,416
= 688,037,096
= 0.9601 times
Interpretation:
Year 2021 (0.9601 times):
● The acid-test ratio of 0.9601 times indicates that for every rupee of current liabilities, the
company has PKR0.9601 in highly liquid assets that can be quickly converted to cash to meet
its short-term obligations.
● A ratio below 1 suggests a potential challenge in meeting all short-term obligations with only
the most liquid assets.
Year 2022 (0.9662 times):
● The increase in the acid-test ratio to 0.9662 times in 2022 suggests a slight improvement in
the company's short-term liquidity position.
● The company now has PKR0.9662 in highly liquid assets for every rupee of current
liabilities, indicating a slightly stronger ability to cover short-term obligations.

● Cash Ratio:
2022:
𝐶𝑎𝑠ℎ & 𝐶𝑎𝑠ℎ 𝑒𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠
Cash Ratio = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
15,793,568
= 1,028,762,141
= 0.01535 times
2021:
𝐶𝑎𝑠ℎ & 𝐶𝑎𝑠ℎ 𝑒𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠
Cash Ratio = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

1
 10,328,059
= 688,037,096
= 0.015011 times
Interpretation:
Year 2021 (0.015011 times):
● A cash ratio of 0.015011 times means that for every rupee of short-term liabilities,
the company has 0.015011 rupees in cash and cash equivalents.
● This ratio indicates a relatively low level of liquidity, suggesting that the company
may have a limited ability to cover its short-term obligations with readily available
cash.
Year 2022 (0.01535 times):
● The increase in the cash ratio to 0.01535 times in 2022 suggests a slight improvement
in liquidity compared to the previous year.
● While the cash ratio is still relatively low, the company now has 0.01535 rupee in
cash and cash equivalents for every rupee of short-term liabilities.

● Operating Cash Flow Ratio:

2022:
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤
Operating Cash Flow Ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
50,461,301
= 1,028,762,141
= 0.04905
2021:
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤
Operating Cash Flow Ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
35,740,954
= 688,037,096
= 0.05194
Interpretation:
Year 2021 (0.05194):
● A ratio of 0.05194 suggests that, on average, the company generated PKR0.05194 in
operating cash flow for every rupee of average total assets during the year.
● This implies that the company had a reasonable ability to convert its operational
activities into cash in 2021.
Year 2022 (0.04905):
● The decrease in the Operating Cash Flow Ratio to 0.04905 in 2022 indicates a
slightly lower ability to generate operating cash flow relative to average total assets.

1
 ● This may suggest changes in the company's cash generation efficiency, working
capital management, or overall operational performance

● Debt Ratio:
2022:
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Debt Ratio = 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
1,228,459,013
= 1,268,107,071
= 96.87%
2021:
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Debt Ratio = 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
883,840,382
= 918,060,448
= 96.27%
Interpretation:
Year 2021 (96.27%):
● The Debt Ratio of 96.27% indicates that, at the end of 2021, approximately 96.27%
of the company's total assets were financed by debt.
● This suggests a high level of financial leverage, where a significant portion of the
company's capital structure is composed of debt.
Year 2022 (96.87%):
● The increase in the Debt Ratio to 96.87% in 2022 indicates a slightly higher reliance
on debt to finance the company's assets.
● This suggests that, compared to the previous year, the company's level of financial
leverage has marginally increased.

● Debt to Equity Ratio:

2022:
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Debt to Equity Ratio =
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟'𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
1,228,459,013
= 39,648,058
= 30.98409 times
2021:
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Debt to Equity Ratio =
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟'𝑠 𝐸𝑞𝑢𝑖𝑡𝑦

1
 883,840,382
= 34,220,066
= 25.8281 times
Interpretation:
Year 2021 (25.8281 times):
● The Debt to Equity Ratio of 25.8281 times implies that, at the end of 2021, the company had
PKR 25.83 in total debt for every PKR1 of shareholders' equity.
● This suggests a relatively high level of financial leverage, indicating that the company relies
significantly on debt financing to support its operations and growth.
Year 2022 (30.98409 times):
● The increase in the Debt to Equity Ratio to 30.98409 times in 2022 indicates a higher
proportion of debt relative to equity.
● This may suggest that the company has taken on additional debt or experienced a decrease in
equity during the year.

● Interest Coverage Ratio:

2022:
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒
Interest Coverage Ratio =
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
72,800,002
= 57,296,389
= 1.27058 times

2021:
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒
Interest Coverage Ratio =
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
55,878,729
= 40,036,825
= 1.3956 times
Interpretation:
Year 2021 (1.3956 times):
● A ratio of 1.3956 times indicates that the company's operating earnings (EBIT) are
1.3956 times higher than its interest expenses.
● This implies a moderate ability to cover interest payments, but it is generally
considered lower than ideal. A higher ratio is often preferred as it suggests a greater
buffer against financial risk.
Year 2022 (1.27058 times):
● The decrease in the ratio to 1.27058 times in 2022 suggests a slight decline in the
company's ability to cover interest payments compared to the previous year.
● A lower interest coverage ratio may indicate increased financial risk, as the company
is generating less operating income relative to its interest obligations.

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 ● Asset Turnover Ratio:
2022:
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
Asset turnover Ratio =
𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
1,076,740,109
= 1,268,107,071
= 0.849092

2021:
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
Asset Turnover Ratio =
𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
644,504,419
= 918,060,448
= 0.702028
Interpretation:
Year 2021:
● An asset turnover ratio of 0.702 suggests that, on average, the company generated
PKR0.702 in revenue for every rupee of assets during the year.
● This may indicate that the company's assets were not utilized very efficiently in
generating sales.
Year 2022 :
● The increase in the asset turnover ratio to 0.820 in 2022 indicates improved efficiency
in utilizing assets to generate sales.
● The company generated PKR0.820 in revenue for every rupee of assets during the
year, suggesting a more effective use of its asset base

● Gross Margin Ratio:

2022:
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
Gross Margin Ratio =
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
85,521,705
= 1,076,740,109
= 7.94%
2021:
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
Gross Margin Ratio =
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
52,851,737
= 644,504,419

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 = 8.20%
Interpretation:
Year 2021 (8.20%):
● The gross margin ratio of 8.20% indicates that, for every rupee of revenue generated
in 2021, the company retained PKR0.082003 after covering the direct costs
associated with producing goods or services.
● A higher gross margin ratio is generally favorable, suggesting that the company has a
larger margin to cover operating expenses and generate net profit.
Year 2022 (7.94%):
● The decrease in the gross margin ratio to 7.94% in 2022 suggests that the company
retained a slightly smaller portion of revenue after accounting for the cost of goods
sold

● Operating Margin Ratio:

2022:
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒
Operating Margin Ratio =
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
72,800,002
= 1,076,740,109
= 6.76%
2021:
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒
Operating Margin Ratio =
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
55,878,729
= 644,504,419
= 8.67%
Interpretation:
Year 2021 (8.67%):
● An operating margin of 8.67% indicates that the company retained 8.67 paisas as
operating profit for every rupee of sales revenue.
● This suggests a relatively healthy operating performance, with a significant portion of
revenue translating into operating income.
Year 2022 (6.76%):
● The decrease in the operating margin to 6.76% in 2022 suggests that the company
retained a lower percentage of sales revenue as operating profit.

● Return on Assets Ratio:

2022:

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 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
Return on Assets Ratio =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
10,366,231
= 1,268,107,071
= 0.008174
2021:
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
Return on Assets Ratio =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
10,985,994
= 918,060,448
= 0.0119665
Interpretation:
Year 2021 (0.0119665):
● The ROA of 0.0119665 indicates that, on average, the company generated
approximately 1.19 paisas of profit for every rupee of assets during 2021.
● A higher ROA is generally considered favorable, as it suggests that the company is
effectively utilizing its assets to generate earnings.
Year 2022 (0.008174):
● The decrease in ROA to 0.008174 in 2022 suggests that the company generated
around 0.82 paisas of profit for every rupee of assets during the year.
● A lower ROA may indicate reduced profitability relative to the company's asset base
compared to the previous year.

● Return on Equity Ratio:

2022:
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
Return on Equity Ratio =
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟'𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
10,366,231
= 39,648,058
= 26.145%
2021:
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
Return on Equity Ratio =
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟'𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
10,985,994
= 34,220,066
= 32.103%
Interpretation:
Year 2021 (32.103%):
● An ROE of 32.103%, indicates that the company generated approximately 32.103
paisas in net income for every rupee of average shareholders' equity during the year.

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 ● A higher ROE generally suggests efficient utilization of equity capital, and it is often
considered a positive indicator of a company's profitability.
Year 2022 (26.145%):
● The decrease in ROE to 26.145%, in 2022 indicates a decline in the company's ability
to generate profits relative to shareholders' equity.
● A lower ROE may suggest challenges in maintaining or improving profitability levels
compared to the previous year.

● Debt to EBITDA Ratio:

2022:
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Debt to EBITDA Ratio =
𝐸𝐵𝐼𝑇𝐷𝐴
1,228,459,013
= 72,800,002
= 16.8744
2022:
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Debt to EBITDA Ratio =
𝐸𝐵𝐼𝑇𝐷𝐴
883,840,382
= 55,878,729
= 15.81711
Interpretation:
Year 2021 (15.81711):
● A Debt to EBITDA ratio of 15.81711 suggests that, at the end of 2021, the company
had 15.81711 times its EBITDA in total debt.
● This ratio is an indication of the company's ability to cover its total debt obligations
using its EBITDA. A lower ratio is generally considered more favorable, as it implies
a lower level of debt relative to earnings.
Year 2022 (16.8744):
● The increase in the Debt to EBITDA ratio to 16.8744 in 2022 indicates that the
company's total debt has increased compared to its EBITDA.
● A higher ratio could suggest increased financial risk and may indicate that the
company is more leveraged, potentially facing challenges in meeting its debt
obligations.
Conclusion:
In 2021, the company showed efficient asset utilization with an Asset Turnover Ratio of 0.702,
indicating it generated $0.702 in revenue for every dollar of assets. Operating efficiency was evident
with a low Operating Ratio of 2.57%, signaling effective cost management. However, financial
leverage increased, as reflected in a Debt to EBITDA Ratio of 15.81711. In 2022, while asset
turnover improved (0.820), there was a slight increase in operating expenses (3.174%), and financial

2
leverage continued to rise with a Debt to EBITDA Ratio of 16.8744, potentially signaling increased
risk. Overall, a comprehensive analysis of these ratios is crucial to assess the company's financial
health and risk management strategies.