ASSIGNMENT NO:01
SUBMITTED BY:
AREEBA SEHRISH
ROLL NO:
22011554-016
COURSE CODE:
COMM-304
COURSE TITLE:
FINANCIAL STATEMENT ANALYSIS
SEMESTER:
5th
DEPARTMENT:
BS-ACCOUNTING AND FINANCE
COMPANY SELECTED:
BATA PAKISTAN LIMITED
SUBMITTED TO:
SIR MUZAMMIL HUSSAIN
INTRODUCTION:
Baťa Shoe Company was established on September 21, 1894, by siblings Tomáš, Anna and
Antonín Baťa – the eighth generation of Bata family shoemakers – in the rural town of Zlín,
Czechoslovakia.
Since 1942 Bata Pakistan has been rendering its services to its valued customers by offering
quality products. It was incorporated in Pakistan as Bata Shoe Company (Pakistan) Limited in
1951 and went public to become Bata Pakistan Limited in the year 1979.
Address: Bata Pakistan Ltd, Grand Trunk Rd, Bata Pur, Lahore, Punjab 53400
LIQUIDITY ANALYSIS
YEAR 2023 2022
Asset Turnover 116.40 108.51
Current Ratio 1.27 1.43
Effective Tax Rate 31.77 38.04
Interest Cover 0.00 2.88
Inventory Turnover 22.70 3.47
Quick Ratio 1.17 0.70
Times Interest Earned 0.00 0.0
Formulas:
Inventory Turnover = Cost of Goods Sold/ Average Inventory
Current Ratio = Current Assets /Current Liabilities
Quick Ratio =Current Assets - Inventory /Current Liabilities
Effective tax rate=Total tax expense/Total Income × 100
Interest cover= Operating Income/ Interest Expense
Times Interest Earned=EBIT/Interest Expense
Ratio defines:
Turnover:
Turnover in the number of days also compares with the number of days’ sales in the ending
receivables.
Current ratio:
The indicator, the current ratio, determines the short-term debt-paying ability
Inventory turnover:
Inventory turnover indicates the liquidity of the inventory. This computation is similar to the
accounts receivable turnover computation.
Quick ratio:
The current ratio evaluates an enterprise’s overall liquidity position, considering current assets
and liabilities. At times, it is desirable to access a more immediate position than that indicated by
the current ratio. The acid-test (or quick) ratio relates the most liquid assets to current liabilities.
Effective tax rate:
The effective tax rate (ETR) measures the average rate at which an individual or corporation is
taxed on their income.
Interest cover:
Interest cover is a financial metric that measures a company's ability to meet its interest payment
obligations with its earnings. It indicates how many times a company can cover its interest
expenses with its operating income. A higher interest cover ratio suggests better financial health
and lower risk for creditors.
Times Interest Earned (TIE):
Times Interest Earned (TIE) is a financial metric that measures a company's ability to meet its
interest obligations based on its earnings. It indicates how many times a company can cover its
interest expenses with its earnings before interest and taxes (EBIT). A higher TIE ratio suggests
better financial stability and a lower risk of default.
Graph:
Except for a decline in 2020, BATA’s topline has been posting reasonable growth in all the years
under consideration. Its bottom line declined in 2019 and 2020 with a net loss in the latter year.
BATA’s bottom line took an upward flight thereafter. The company’s gross margin slightly
inched up in 2019, while its operating and net margins plunged. This was followed by a drastic
drop in all the margins in 2020. BATA’s margin recovered for the next two years to attain its
highest level in 2022 only to slide back in 2023.
Conclusion:
The liquidity analysis of Bata Pakistan Limited indicates a robust ability to meet short-term
obligations, supported by a favorable current ratio and quick ratio. These metrics reflect efficient
management of current assets and liabilities, ensuring financial stability. The company's solid
liquidity position not only enhances its operational flexibility but also instills confidence among
stakeholders and investors. However, ongoing monitoring of cash flows and working capital
management will be essential to sustain this liquidity in a dynamic market environment. Overall,
Bata Pakistan Limited appears well-positioned to navigate financial challenges while pursuing
growth opportunities.
