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Financial Leverage of Pakistani Companies

Final Project Presentation

LOGO
Financial Leverage of Pakistani Companies

vTopic Introduction

§ Randomly Selected Companies


§ Financial Statements
§ Equity and Debt Proportions
§ Financial Analysis
§ Comments/Conclusion
Financial Leverage of Pakistani Companies

v
v
v
 Leverage
Financial Leverage of Pakistani Companies

Operating Leverage

Financial Leverage Types Of Leverage

Combined Leverage
Financial Leverage of Pakistani Companies

Financial
Leverage

High Low
Leverage Leverage
Financial Leverage of Pakistani Companies

Randomly
Selected
Sapphire
Noon

Dawood Companies

Pepsi

Nishat
Financial Leverage of Pakistani Companies

Introduction Data Collection


Sapphire
Mission Textile Proportions

Values Limited Ratios

Comments
Financial Leverage of Pakistani Companies

Sapphire
Sapphire Textile
Textile Introduction
Introduction

Textile Largest Newest


Manufacturers Technology
Company Innovation
Financial Leverage of Pakistani Companies

Mission

, keeping a lead position in our business, maintaining our values based on good business a

Values
P eople
R elationship
I ntegrity
D iversity
E nvironment
Financial Leverage of Pakistani Companies

Utilization of Borrowing Sources of Borrowing

Data
Other Sources of Rate of Interest
Financing Collected

Meeting Debt Requirement Reason of Debt Financing


Financial Leverage of Pakistani Companies
Equity and Debt Proportions

2005 2006 2007 2008

Shareholder’s 2797.114 3893.928 6018.868 5577.492


Equity

Long term Debt 1174.78 934.54 722.264 446.199

total 3971.894 4828.468 6740.95 6023.691

Proportion of 70% 81% 89% 93%


Equity

Proportion of 30% 19% 11% 7%


Debt
Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt Equity Ratio


 Debt Equity Ratio = Long Term Debt/ Shareholder’s Equity


Ratios 2005 2006 2007 2008

Debt to Equity 0.42 0.24 0.12 0.08


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt to Capital Ratio


 Debt to Capital = Debt/Shareholder’s Equity + Debt


Ratio 2005 2006 2007 2008

Debt to Capital 0.30 0.19 0.11 0.07


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt to Asset Ratio


 Debt to Assets Ratio = Debt/Total Assets


Ratio 2005 2006 2007 2008

Debt to Assets 0.16 0.10 0.06 0.04


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Financial Leverage

Ratio 2005 2006 2007 2008

Financial 30:70 19:81 11:89 7:93


Leverage
Financial Leverage of Pakistani Companies

Ratios
Decreasing
Reliance
On Equity

Low
Leverage
Increase
Comments
In Profits
Financial Leverage of Pakistani Companies

Introduction Data Collection


Noon
Mission Pakistan Proportions

Vision Limited Ratios

Comments
Financial Leverage of Pakistani Companies

Noon
Noon Pakistan
Pakistan Limited
Limited Introduction
Introduction

UHT
Incorporated First Milk
In 1966 Tetrapak Nurpur
Powder plant
Financial Leverage of Pakistani Companies

Mission

our customers with the finest, high-quality products and to leading the industry in healthy and
phy of adhering to the highest ethical conduct in all its business dealings, treatment of its em

Vision

rge and to serve as a model of a sustainable business alternative that nurtures social and e
Financial Leverage of Pakistani Companies

Utilization of Borrowing Sources of Borrowing

Data
Other Sources of Rate of Interest
Financing Collected

Meeting Debt Requirement Reason of Debt Financing


Financial Leverage of Pakistani Companies
Equity and Debt Proportions

2005 2006 2007 2008

Shareholder’s 127514 109018 108758 169836


Equity

Long term Debt 250731 329699 286235 303591

total 378245 438717 394993 473427

Proportion of 34% 25% 28% 36%


Equity

Proportion of 66% 75% 72% 64%


Debt
Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt Equity Ratio


 Debt Equity Ratio = Long Term Debt/ Shareholder’s Equity


Ratios 2005 2006 2007 2008

Debt to Equity 0.74 0.85 0.65 0.85


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt to Capital Ratio


 Debt to Capital = Debt/Shareholder’s Equity + Debt


Ratio 2005 2006 2007 2008

Debt to Capital 0.66 0.75 0.72 0.64


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt to Asset Ratio


 Debt to Assets Ratio = Debt/Total Assets


Ratio 2005 2006 2007 2008

Debt to Assets 0.48 0.59 0.52 0.41


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Financial Leverage

Ratio 2005 2006 2007 2008

Financial 66:34 25:75 28:72 36:64


Leverage
Financial Leverage of Pakistani Companies

v Interest Coverage Ratio


 Interest Coverage Ratio = EBIT/Interest Payment


Ratio 2005 2006 2007 2008

Interest 3.15 0.61 1.5 2.37


Coverage
Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

Ratios
Increasing
Reliance
On Debt

High
Leverage
Low
Comments
Profits
Financial Leverage of Pakistani Companies

Introduction Data Collection

Mission PepsiCo Proportions

Values Ratios

Comments
Financial Leverage of Pakistani Companies

PepsiCo
PepsiCo Introduction
Introduction

World Food & Environmentally


Leader Responsible
Beverages
Company
Financial Leverage of Pakistani Companies

Mission

duce financial rewards to investors as we provide opportunities for growth and enrichment to

Vision
mental stewardship, activities to benefit society, and a commitment to build shareholder valu
Financial Leverage of Pakistani Companies

Utilization of Borrowing Sources of Borrowing

Data
Other Sources of Rate of Interest
Financing Collected

Meeting Debt Requirement Reason of Debt Financing


Financial Leverage of Pakistani Companies

Equity and Debt Proportions


2005 2006 2007 2008

Shareholder’s 14320 15447 17325 12203


Equity

Long term Debt 2313 2550 4203 7858

total 16633 17997 21528 20061

Proportion of 86% 86% 80% 61%


Equity

Proportion of 14% 14% 20% 39%


Debt
Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt Equity Ratio


 Debt Equity Ratio = Long Term Debt/ Shareholder’s Equity


Ratios 2005 2006 2007 2008

Debt to Equity 0.161 0.165 0.24 0.21


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt to Capital Ratio


 Debt to Capital = Debt/Shareholder’s Equity + Debt


Ratio 2005 2006 2007 2008

Debt to Capital 0.14 0.14 0.20 0.39


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt to Asset Ratio


 Debt to Assets Ratio = Debt/Total Assets


Ratio 2005 2006 2007 2008

Debt to Assets 0.07 0.085 0.121 0.21


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Financial Leverage

Ratio 2005 2006 2007 2008

Financial 14:86 14:86 20:80 39:61


Leverage
Financial Leverage of Pakistani Companies

v Interest Coverage Ratio


 Interest Coverage Ratio = EBIT/Interest Payment


Ratio 2005 2006 2007 2008

Interest 23.13 26.94 32.01 21.07


Coverage
Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

Ratios
Increasing
Reliance
On Debt

High
Leverage
Low
Comments
Profits
Financial Leverage of Pakistani Companies

Introduction Data Collection


Nishat
Mission Textile Proportions

Values Limited Ratios

Comments
Financial Leverage of Pakistani Companies

Nishat
Nishat Textile
Textile Introduction
Introduction

Multinational Principal Core


5 Listed Activity
Companies Operations Business
Financial Leverage of Pakistani Companies

Mission

y through good governance and foster a sound and dynamic team, so as to achieve optimum

Vision
h and finished product manufacturing Company with highly professionals and fully equipped

h highly professionals and fully equipped to play a meaningful role on sustainable basis in th
Financial Leverage of Pakistani Companies

Utilization of Borrowing Sources of Borrowing

Data
Other Sources of Rate of Interest
Financing Collected

Meeting Debt Requirement Reason of Debt Financing


Financial Leverage of Pakistani Companies

Equity and Debt Proportions

2005 2006 2007 2008

Shareholder’s 16563.14 32935.5 49269.2 35452.7


Equity

Long term Debt 2858.16 3015.38 1773.82 1047.79

total 19421.30 35950.58 51043.02 36500.5

Proportion of 86% 92% 97% 98%


Equity

Proportion of 14% 08% 03% 02%


Debt
Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt Equity Ratio


 Debt Equity Ratio = Long Term Debt/ Shareholder’s Equity


Ratios 2005 2006 2007 2008

Debt to Equity 0.17 0.09 0.03 0.02


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt to Capital Ratio


 Debt to Capital = Debt/Shareholder’s Equity + Debt


Ratio 2005 2006 2007 2008

Debt to Capital 0.14 0.08 0.03 0.02


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt to Asset Ratio


 Debt to Assets Ratio = Debt/Total Assets


Ratio 2005 2006 2007 2008

Debt to Assets 0.13 0.09 0.04 0.02


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Financial Leverage

Ratio 2005 2006 2007 2008

Financial 14:86 08:92 03:97 02:98


Leverage
Financial Leverage of Pakistani Companies

v Interest Coverage Ratio


 Interest Coverage Ratio = EBIT/Interest Payment


Ratio 2005 2006 2007 2008

Interest 4.9 2.6 2.5 7.4


Coverage
Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

Ratios
Decreasing
Reliance
On Equity

Low
Leverage Increase Comments
In
Profits
Financial Leverage of Pakistani Companies

Introduction Data Collection


Dawood
Mission Hercules Proportions

Values Ratios

Comments
Financial Leverage of Pakistani Companies

Dawood
Dawood Hercules
Hercules Introduction
Introduction

Latest Tallest First


Incorporated
In 1968 Technology Industrial Manufacturing
Structure Co
Financial Leverage of Pakistani Companies
Mission & Vision

by maintaining highest standards of product quality thereby playing our role in the developme

nerated and nurtured.

es.
Financial Leverage of Pakistani Companies

Utilization of Borrowing Sources of Borrowing

Data
Other Sources of Rate of Interest
Financing Collected

Meeting Debt Requirement Reason of Debt Financing


Financial Leverage of Pakistani Companies

Equity and Debt Proportions

2005 2006 2007 2008

Shareholder’s 9355.24 9273.14 18889.33 17382.66


Equity

Long term Debt - - 6500 6302.5

total 9355.24 9273.14 25389.33 23685.16

Proportion of 100% 100% 75% 74%


Equity

Proportion of 0% 0% 25% 26%


Debt
Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt Equity Ratio


 Debt Equity Ratio = Long Term Debt/ Shareholder’s Equity


Ratios 2005 2006 2007 2008

Debt to Equity - - 0.34 0.36


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt to Capital Ratio


 Debt to Capital = Debt/Shareholder’s Equity + Debt


Ratio 2005 2006 2007 2008

Debt to Capital - - 0.25 0.26


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Debt to Asset Ratio


 Debt to Assets Ratio = Debt/Total Assets


Ratio 2005 2006 2007 2008

Debt to Assets - - 0.22 0.24


Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

v Financial Leverage

Ratio 2005 2006 2007 2008

Financial 0:100 0:100 25:75 26:74


Leverage
Financial Leverage of Pakistani Companies

v Interest Coverage Ratio


 Interest Coverage Ratio = EBIT/Interest Payment


Ratio 2005 2006 2007 2008

Interest 3.87 1.81 1.36 2.82


Coverage
Financial Leverage of Pakistani Companies
Financial Leverage of Pakistani Companies

Ratios
Decreasing
Reliance
On Equity

Low
Leverage
Increase
Comments
In Profits
Financial Leverage of Pakistani Companies

Findings
Low High
leveraged leveraged
companies companies
Risk factor
Reliance on
 Sapphire equity  PepsiCo
Nishat Noon
Raise capital
Dawood

Overall Performance
Financial Leverage of Pakistani Companies

Recommendations

Low leverage

Reduce risk of bankruptcy

Increase borrowing capacity

High availability of lenders