thal textile mills
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COLONY) THAL TEXTILE MILLS LTD.
SUBMITTED TO:
Sir Farrukh Naveed
SUBMITTED BY:
Shakir Rashid (27)
M.Com (4th Semester)Department of CommerceThe Islamia UniversityBahawalpur.
1
Department of Commerce, The Islamia University of Bahawalpur has always
been admirable in its efforts to equip the future executives with arms of creativity,
flexibility and adaptability to meet the challenges offered by fast changing
business environment.
To achieve the above goals the department is providing both text and practical
knowledge to its students with its available resources. Text knowledge is very
well transferred to the students within the premises of the department; Practical
knowledge requires the kind co-operation of various business organization of the
country. Faculty members are always trying their best to ask the students to
explore the market by assigning different field activities and to prepare a report.
This report has been written on the “Colony Thal Textile Mills Ltd.” I have done
my best efforts to complete this report efficiently and effectively with all abilities. I
hope this report fulfills the criteria and expectations of Department of Commerce.
I have tried my best to make it analytical as well as informative.
2
All praise for ALLAH, the most merciful and his prophet Muhammad
(PBUH) is for every torch of guidance and knowledge for humanity. I offer
humblest and sincerest words of thanks to ALLAH Almighty who blessed me with
potential and ability to make material contribution to already existing ocean of
knowledge. I also grateful to the department of Commerce who gives me the
opportunity of completing Financial Analysis Report on “Colony Thal Textile Mills
Limited” and enhances my capabilities. This report is very much helpful me as I
learn a lot by applying theoretical knowledge in practical field.
I would also show our gratitude to our honorable and respected teacher
Mr. Farrukh Naveed Who furnished me with the opportunity to complete this
report, and thereby consolidating my concepts, enriching my knowledge,
establishing my skills and strengthening my confidence, especially his lectures.
3
“I dedicate my Financial Analysis Report efforts to my PARENTS &
respected Teachers who taught & hold my hands on every step of my life.”
4
Ch:No Contents Page #
1 Executive Summary 07
2 Introduction & History 08
3 Income Statement (5 Years) 12
4 Balance Sheet (5 Years) 13
5 Horizontal Analysis of Income statement 14
6 Vertical Analysis of Income statement 15
7 Horizontal Analysis of Balance sheet 16
8 Vertical Analysis of Balance sheet 17
9 Short term Debt paying Ability 18
10 Long term Debt paying Ability 24
11 Profitability Analysis 26
12 Investor Analysis 29
5
13 Cash flow Analysis 29
14 Multivariate Mode (Z-Score) 31
15 Suggestions & Recommendations 33
16 Conclusion 34
6
I assigned to analyze the Financial Statement of any manufacturing Company. I
choose COLONY THAL TEXTILE MILLS LTD. A subsidiary of COLONY MILLS
LTD. In this report I have used different techniques that are necessary to make
any investment decision. I worked in different analysis techniques that are
recasting, trend analysis, vertical analysis, and ratios including short term liquidity
ratios, long term liquidity ratios, profitability ratios, investor’s analysis, cash flow
ratios, DU_PONT analysis, & Z_SCORE. By working at this company I find so
many useful insights about manufacturing sector.
Manufacturing Industry sector has a good impact on economy of Pakistan. This
is most growing industry of Pakistan. This sector contributes a major portion to
our export and also the total Gross Domestic Product (GDP). This sector gives
great employment to our population.
Introduction of Company:
7
Colony Thal Textile Mills Limited is a Pakistan-based company. The Company is
principally engaged in the manufacturing and sale of yarn. It offers a variety of
yarn including carded and combed, slab and core yarn, single and double yarn,
made from 100% cotton and synthetic material, catering to the needs of knitting
and weaving consumers in domestic and international markets.
The Colony Group is one of Pakistan's oldest and the most revered business
groups. The Group has grown phenomenally and has become a leading player in
all the sectors in which it operates. The Group has set up different companies
whose activities span various sectors like Textiles, Sugar and Distillery.
History of Company:
The Colony Group was founded in 1986 with a focus on providing high net worth
families and individuals with intelligent wealth management and investment
guidance. Since its founding, the firm has grown substantially, attracting
corporate and institutional clients.
Recognizing the importance and success of its investment management
capabilities, The Colony Group established Colony Investment Management as a
separate division, through which it has built an experienced, talented team of
Chartered Financial Analysts and other investment professionals dedicated to
delivering out performance over full market cycles. Our proprietary, research-
intensive approach is implemented through a defined, systematic, and repeatable
investment process.
Mission Statement:
8
The Company's mission is:
To install new Machinery and to acquire sophisticated process technology
to achieve maximum growth in a competitive quality environment.
To be recognized as and remain a leading, innovative and effective
supplier of Textile products.
To explore new Export and Local Markets.
To provide our customers with outstanding value, quality, service and
delivery.
To ensure a fair return to the investors, shareholders and employees of
the Company.
To enable all employees to develop and fulfill their individual goals and
aspirations in a safe working environment.
Vision Statement:
(Colony) Thal Textile Mills Limited has a vision to be a trustworthy enterprise
dedicated to service, quality and integrity & structured to maintain in-depth
competence and knowledge about business, customers and market.
Our work force will be the most efficient in the industry through multiple skill
learning, the fostering of team work and security of safe work environment.
Officers and Directors:
CHAIR PERSON MRS AYESHA TANVEER
CHAIRMAN MR TANVEER A.SHIEKH
DIRECTORS MR. TANVEER A. SHIEKH
9
MRS AYESHA TANVEER
MR. M.TAIMOOR TANVEER
MS. BEENISH ELAHI
MR. SARDAR.M. NAWAZ
MR. HADAYAT A.SHEIKH
MR. ABRAR H. NAQVI
MR. AHMAD SHAIKH
CHIEF FINANCIAL OFFICER MR. GHULAM MURTAZA BHATTI
COMPANY SECRETORY MR. GHULAM MURTAZA BHATTI
AUDITORS SARWARS CHARTERED ACCOUNTANTS
REGISTERED OFFICE 7/1 MAIN SHAMI ROAD,
LAHORE CANTT.
PH (042) 6666634
FAX (042)6687353
Mills Ismailpur, Bhakkar
Ph: +92 0453 510440, 510240
Fax: +92 0453 514200
Colony Thal Textile Mills Ltd.
10
Established as a textile manufacturing unit on 24th August, 1946, Colony Mills
Limited is engaged in the production and manufacturing of different types of
yarns of various counts. The company has a healthy portfolio of income
generating assets that crossed total revenues of 7.0 billion rupees in the year
ending June 2009.
Product Range:
100% cotton carded and combed yarns; lycra/spandex core spun and slob yarns.
100% polyester and 100% viscose yarns along with various blends, polyester
viscose yarn, and yarns of polyester cotton and polyester viscose blends in the
range of 6 to 80 Ne (Number English) Counts.
Future Ventures:
A state-of-the-art Open-End Spinning production facility is under construction. It
will be the first of its kind facility in the country, with 2,880 rotors capable of
producing 15,000 Metric Tons of yarn annually, including slub yarns
2005 2006 2007 2008 2009Sales - Net 480,959,17
0881,353,740 777,391,244 374,912,443 120,619,904
11
Cost of Sales 454,800,091
831,275,710 748,525,643 374,101,001 132,840,354
Gross (Loss) / Profit 26,159,079 50,078,030 28,865,601 811,442 -12,220,450
Operating Expenses:
Administrative Exp. 9,775,617 15,145,884 13,674,248 9,472,060 8,770,025
Distribution Exp. 125,830 1,934,522 544,907 28,500 44,450
Total Operating Expenses 9,901,447 17,080,406 14,219,155 9,500,560 8,814,475
Operating Loss / Profit 16,257,632 32,997,624 14,646,446 -8,689,118 -21,034,925
Other Charges 2,469,945 -20,012,227 -2,354,513 0 0
Other Operating Income 7,001,278 177,256 13,338 0 14,441,582
Loss/profit from operation 20,788,965 13,162,653 12,305,271 -8,689,118 -6,593,343
Finance cost 10,765,653 -19,704,199 -25,931,296 -23,867,515 -28,116,755
Profit/(loss) before taxation 4,488,930 -6,541,546 -13,626,025 -32,556,633 -34,710,098
Provision for taxation for current year 5,990,687 -3,134,440 -2,971,593 -1,874,562 0
Loss after taxation 10,479,617 -9,675,986 -16,597,618 -34,431,195 -34,710,098
2005 2006 2007 2008 2009ASSETS:
Current AssetsStock-in-trade 65,229,367 84,351,245 85,175,280 52,575,116 56,873,008Stores and spares 10,225,174 11,587,641 13,092,934 13,755,071 13,461,417Trade debtors 27,058,144 16,145,519 18,873,802 22,566,958 20,384,462
12
Loans and advances 929,889 2,389,556 4,303,149 2942303 3,396,075Trade Deposits, prepayments and other receivables
9,631,372 13,784,760 15,020,068 6,172,949 6,104,474
Cash and bank balances 7,076,799 3,928,220 1,591,438 3,251,652 3,956,283Total Current Assets 120,150,745 132,186,941 138,056,671 101,264,049 104,175,719Non current assets Assets at cost less accumulated Depreciation
390,659,088 377,053,935 380,762,927 368,221,228 322,227,851
Asset Subject to Finance Lease 12,621,396 0 0 0 27,642,664Long term deposits 2459199 2454443 2454443 2454443 2,454,443Total Non Current Assets 405,739,683 379,508,378 383,217,370 370,675,671 352,324,958Total Assets 525,890,428 511,695,319 521,274,041 471,939,720 456,500,677LIABILITIES:
Current liabilitiesCurrent portion of long term liabilities 20,642,110 25,718,177 5,947,568 0 0Short term Financing 68,403,096 83,225,227 84,339,492 73,290,193 78,461,577Accrued markup on secured loan 2,308,729 1,442,303 5,202,204 4,273,136 31,409,537Trade and other payables 95,555,248 79,090,989 115,384,208 65,096,685 61,359,625Provision for taxation 10,072,361 7,888,244 11775200 9364411 8,264,411Total Current Liabilities 196,981,544 197,364,940 222,648,672 152,024,425 179,495,150Non Current liabilities Long term Loans 191,047,730 187,574,976 188,418,710 245580525 242,606,225Deferred liability 2,772,925 1,938,249 1987123 546,429 212,749Total Non Current Liabilities 193,820,655 189,513,225 190,405,833 246,126,954 242,818,974Share capital and Reserves Share capital 55,687,500 55,687,500 55,687,500 55,687,500 55687500Surplus on Revaluation of Fixed Assets
164,621,453 142,152,989140,841,725
139593015 133,512,117
Reserves 17,887,309 17,887,309 17887309 17,887,309 17,887,309Accumulated loss -
103,108,033-90,910,644 -
106,196,998-139379483 -
172,900,373Total Share Capital and Reserves 135,088,229 124,817,154 108,219,536 73,788,341 34,186,553Total Liabilities & Equity 525,890,428 511,695,319 521,274,041 471,939,720 456,500,677
2005 2006 2007 2008 2009Sales - Net
100% 183.25% 161.63% 77.95% 25.08%Cost of Sales
100% 182.78% 164.58% 82.26% 29.21%Gross (Loss) / Profit
100% 191.44% 110.35% 3.10% -46.72%
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Operating Expenses:
Administrative Exp.
100% 154.94% 139.88% 96.89% 89.71%Distribution Exp.
100% 1537.41% 433.05% 22.65% 35.33%Total Operating Expenses
100% 172.50% 143.61% 95.95% 89.02%Operating Loss / Profit
100% 202.97% 90.09% -53.45% -129.38%Other Charges
Other Operating Income
100% 2.53% 0.19% 0.00% 206.27%Loss/profit from operation
100% 63.32% 59.19% -41.80% -31.72%Finance cost
100% -183.03% -240.87% -221.70% -261.17%Profit/(loss) before taxation
100% -145.73% -303.55% -725.26% -773.24%Provision for taxation for current year
100% -52.32% -49.60% -31.29% 0.00%Loss after taxation
100% -92.33% -158.38% -328.55% -331.22%
2005 2006 2007 2008 2009Sales - Net 100% 100% 100% 100% 100%
Cost of Sales 94.56% 94.32% 96.29% 99.78% 110.13%
Gross (Loss) / Profit 5.44% 5.68% 3.71% 0.22% -10.13%
Operating Expenses: 0.00% 0.00% 0.00% 0.00% 0.00%
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Administrative Exp. 2.03% 1.72% 1.76% 2.53% 7.27%
Distribution Exp. 0.03% 0.22% 0.07% 0.01% 0.04%
Total Operating Expenses 2.06% 1.94% 1.83% 2.53% 7.31%
Operating Loss / Profit 3.38% 3.74% 1.88% -2.32% -17.44%
Other Charges 0.51% -2.2706% -0.30% 0.00% 0.00%
Other Operating Income 1.46% 0.02% 0.00% 0.00% 11.97%
Loss/profit from operation 4.32% 1.49% 1.58% -2.32% -5.47%
Finance cost 2.24% -2.24% -3.34% -6.37% -23.31%
Profit/(loss) before taxation 0.93% -0.74% -1.75% -8.68% -28.78%
Provision for taxation for current year 1.25% -0.36% -0.38% -0.50% 0.00%
Loss after taxation 2.18% -1.10% -2.14% -9.18% -28.78%
2005 2006 2007 2008 2009ASSETS:
Current Assets
Stock-in-trade 100% 129% 131% 81% 87%Stores and spares 100% 113% 128% 135% 132%Trade debtors 100% 60% 70% 83% 75%Loans and advances 100% 257% 463% 316% 365%Trade Deposits, prepayments and other receivables 100% 143% 156% 64% 63%Cash and bank balances 100% 56% 22% 46% 56%Total Current Assets 100% 110% 115% 84% 87%Non current assets
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Assets at cost less accumulated Depreciation 100% 97% 97% 94% 82%Asset Subject to Finance Lease 100% 0% 0% 0% 219%Long term deposits 100% 100% 100% 100% 100%Total Non Current Assets 100% 94% 94% 91% 87%Total Assets 100% 97% 99% 90% 87%LIABILITIES:
Current liabilities
Current portion of long term liabilities 100% 125% 29% 0% 0%Short term Financing 100% 122% 123% 107% 115%Contingencies 100% 62% 225% 185% 1360%Trade and other payables 100% 83% 121% 68% 64%Provision for taxation 100% 78% 117% 93% 82%Total Current Liabilities 100% 100% 113% 77% 91%Non Current liabilities Long term finance - secured 100% 98% 99% 129% 127%Deferred liability 100% 70% 72% 20% 8%Total Non Current Liabilities 100% 98% 98% 127% 125%Share capital and Reserves Share capital 100% 100% 100% 100% 100%Share premium 100% 86% 86% 85% 81%Reserves 100% 100% 100% 100% 100%Accumulated loss 100% 88% 103% 135% 168%Total Share Capital and Reserves 100% 92% 80% 55% 25%Total Liabilities & Equity 100% 97% 99% 90% 87%
2005 2006 2007 2008 2009ASSETS:
Current Assets
Stock-in-trade 12.40% 16.48% 16.34% 11.14% 12.46%Stores and spares 1.94% 2.26% 2.51% 2.91% 2.95%
Trade debtors 5.15% 3.16% 3.62% 4.78% 4.47%
Loans and advances 0.18% 0.47% 0.83% 0.62% 0.74%
Trade Deposits, prepayments and other receivables
1.83% 2.69% 2.88% 1.31% 1.34%
Cash and bank balances 1.35% 0.77% 0.31% 0.69% 0.87%Total Current Assets 22.85% 25.83% 26.48% 21.46% 22.82%
Non current assets
Assets at cost less accumulated Depreciation
74.29% 73.69% 73.04% 78.02% 70.59%
Asset Subject to Finance Lease 2.40% 0.00% 0.00% 0.00% 6.06%
Long term deposits 0.47% 0.48% 0.47% 0.52% 0.54%
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Total Non Current Assets 77.15% 74.17% 73.52% 78.54% 77.18%Total Assets 100% 100% 100% 100% 100%
LIABILITIES:
Current liabilities
Current portion of long term liabilities 3.93% 5.03% 1.14% 0.00% 0.00%
Short term Financing 13.01% 16.26% 16.18% 15.53% 17.19%
Accrued markup on secured loan 0.44% 0.28% 1.00% 0.91% 6.88%
Trade and other payables 18.17% 15.46% 22.14% 13.79% 13.44%
Provision for taxation 1.92% 1.54% 2.26% 1.98% 1.81%Total Current Liabilities 37.46% 38.57% 42.71% 32.21% 39.32%
Non Current liabilities
Long term Loans 36.33% 36.66% 36.15% 52.04% 53.14%
Deferred liability 0.53% 0.38% 0.38% 0.12% 0.05%Total Non Current Liabilities 36.86% 37.04% 36.53% 52.15% 53.19%
Share capital and Reserves Share capital 10.59% 10.88% 10.68% 11.80% 12.20%
Surplus on Revaluation of Fixed Assets 31.30% 27.78% 27.02% 29.58% 29.25%
Reserves 3.40% 3.50% 3.43% 3.79% 3.92%Accumulated loss -19.61% -17.77% -20.37% -29.53% -37.88%
Total Share Capital and Reserves 25.69% 24.39% 20.76% 15.64% 7.49%Total Liabilities & Equity 100% 100% 100% 100% 100%
Days’ Sales in Receivable = Gross Receivables / Net Sales per Day
Years 2005 2006 2007 2008 2009Gross receivables 27,058,144 16,145,519 18,873,802 22,566,958 20,384,462Net Sales per Day 1,317,696 2,414,668 2,129,839 1,027,157 330,465 Ratio (days) 21 7 9 22 62
The days’ sale in receivables gives an indication of the length of time that the
receivables have been outstanding at the end of the year. As there is increasing
trend in the years preceding. Its mean the company is becoming less efficient
day by day in collecting its receivables.
Account Receivable Turnover = Net Sales / Avg. Gross ReceivablesYears 2005 2006 2007 2008 2009Net Sales 480,959,170 881,353,740 777,391,244 374,912,443 120,619,904
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Average Gross Receivables 88,721,315 77,970,741 61,825,222 42,951,420 20,384,462Ratio (times) 5.42 11.30 12.57 8.73 5.92
Account receivable turnover indicates the liquidity of the receivables. This is the
ratio of the number of times that accounts receivable amount is collected
throughout the year. High accounts receivable turnover ratio indicates a tight
credit policy.
A low or declining accounts receivable turnover ratio indicates a collection
problem, part of which may be due to bad debts. There is increasing decreasing
trend. There is fluctuation in the values.
A/R Turnover in Days = Avg. Gross Receivables / Net Sales per Day
Years 2005 2006 2007 2008 2009Average Gross Receivables 88,721,315 77,970,741 61,825,222 42,951,420 20,384,462
Net Sales per Day 1,317,69
6 2,414,6
68 2,129,83
9 1,027,1
57 330,46
5
Ratio (days) 67 3
2 2
9
42 62
This ratio tells us about the time period to collect the account receivable. It is
favorable when there is decreasing trend as we are recovering our amount in
less time. In above case there is a mixture of decrease and then increasing
trend. Company should try to decrease its receivable days.
Days Sales in Inventory= Ending Inventory / CGS per Day
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Years 2005 2006 2007 2008 2009Ending Inventory 65,229,367 84,351,245 85,175,280 52,575,116 56,873,008Cost of Goods Sole per Day
1,246,028
2,277,468
2,050,755
1,024,934 363,946
Ratio (days) 52 3
7 4
2
51 156
The days’ sales in inventory tells you the average number of days that it took to
sell the average inventory held during the specified one-year period. You can
also think of it as the number of days of sales that was held in inventory during
the specified year. In the case of colony textiles there is increasing trend from
year 2007 to 2009 and then there is decrease in 2006.
Inventory Turnover = CGS / Avg. InventoryYears 2005 2006 2007 2008 2009CGS 454,800,091 831,275,710 748,525,643 374,101,001 132,840,354Average Inventory 65,229,367 84,351,245 85,175,280 52,575,116 56,873,008
Ratio (times) 6.97 9.8
5 8.79 7.1
2 2.34
Inventory turnover indicates the liquidity of the inventory. A low turnover implies
poor sales and, therefore, excess inventory. A high ratio implies either strong
sales or ineffective buying. In the above case it increases in 2006 and then
gradually decreasing from 2007 to 2009 that is not positive trend.
High inventory levels are unhealthy because they represent an investment with a
rate of return of zero. It also opens the company up to trouble should prices
begin to fall.
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Inventory Turnover in Days = Avg. Inventory /CGS per DayYears 2005 2006 2007 2008 2009Average Inventory 65,229,367 84,351,245 85,175,280 52,575,116 56,873,008
CGS per Day 1,246,02
8 2,277,4
68 2,050,75
5 1,024,9
34 363,94
6
Ratio (days) 52 3
7 4
2
51 156
The inventory turnover figure can be expressed in number of days. In the
inventory turnover in days the decreasing trend is favorable. In the above case
there is rapid change in the inventory turnover in days and also there is
enormous increasing trend which is not favorable.
Operating Cycle=A/R Turnover in Days + Inventory Turnover in Days
Years 2005 2006 2007 2008 2009
A/R Turnover in Days
67
32
29
42
62
Inventory Turnover in Days
52
37
42
51
156
Ratio (days)
120
69
71
93
218
The operating cycle is the number of days from cash to inventory to
accounts receivable to cash. The operating cycle reveals how long cash is
tied up in receivables and inventory.
A long operating cycle means that less cash is available to meet short term
obligations. In the above case there is positive trend in beginning and then
there is increasing trend which is not good.
20
Working Capital= Current Assets - Current LiabilitiesYears 2005 2006 2007 2008 2009Current Assets 120,150,745 132,186,941 138,056,671 101,264,049 104,175,719Current Liabilities 196,981,544 197,364,940 222,648,672 152,024,425 179,495,150Rs. -76,830,799 -65,177,999 -84,592,001 -50,760,376 -75,319,431
Some use the term working capital ratio to mean working capital or net
working capital. Working capital is defined as current assets minus current
liabilities. When used in this manner, working capital ratio is not really a ratio.
Rather, it is simply a dollar amount. In the above case there is negative trend
which shows our current liability are greater than our current assts.
Current Ratio = Current Assets / Current LiabilitiesYears 2005 2006 2007 2008 2009C.A 120,150,745 132,186,941 138,056,671 101,264,049 104,175,719C.L 196,981,544 197,364,940 222,648,672 152,024,425 179,495,150Ratio 0.61 0.67 0.62 0.67 0.58
An indication of a company's ability to meet short-term debt obligations; the
higher the ratio, the more liquid the company is. Current ratio is equal to
current assets divided by current liabilities. If the current assets of a company
are more than twice the current liabilities, then that company is generally
considered to have good short-term financial strength. If current liabilities
exceed current assets, then the company may have problems meeting its
short-term obligations. In the above case there is negative trend in 2009.
21
Acid Test Ratio = Cash + Marketable Securities + Net Receivable / Current Liabilities
Years 2005 2006 2007 2008 2009Cash+M.S+N.R 34,134,943 20,073,739 20,465,240 25,818,610 24,340,745Current Liabilities 196,981,544 197,364,940 222,648,672 152,024,425 179,495,150
Ratio 0.17 0.1
0 0.09 0.1
7 0.14
An acid test ratio indicates whether a firm has enough short-term assets to
cover its immediate liabilities without selling inventory. The acid-test ratio is
far more strenuous than the working capital ratio, primarily because the
working capital ratio allows for the inclusion of inventory assets. There is rapid
negative trend as the ratio is decreasing.
Cash Ratio = Cash Equivalent + M.Securities / Current Liabilities
Years 2005 2006 2007 2008 2009C.E +M.S 120,150,745 132,186,941 138,056,671 101,264,049 104,175,719C.L 196,981,544 197,364,940 222,648,672 152,024,425 179,495,150
Ratio 0.61 0.67 0.62 0.6
7 0.58
The cash ratio measures the extent to which a corporation or other entity can
quickly liquidate assets and cover short-term liabilities, and therefore is of
interest to short-term creditors. In the above case there is increasing trend
that shows a negative sign.
Sales to Working Capital = Sales / Avg. Working CapitalYears 2005 2006 2007 2008 2009Sales 480,959,170 881,353,740 777,391,244 374,912,443 120,619,904Average Working Capital -70,536,121 -55,169,961 -42,134,362 -25,215,961 -15,063,886
Ratio (6.82
) (15.9
8) (18.4
5) (14.8
7) (8.01)
22
This ratio shows the amount of cash required to maintain a certain level of
sales. It is more effective when tracked on a trend line, so the management
can see if there is a long term change in the amount of cash required by the
business in order to generate the same amount of sales.
Times Interest Earned = Operating Income + Other Income / Intr. Exp.Years 2005 2006 2007 2008 2009Oprt.I + O.I 23,258,910 33,174,880 14,659,784 -8,689,118 -6,593,343Interest Exp. 10,765,653 -19,704,199 -25,931,296 -23,867,515 -28,116,755
Times 2.16 (1.6
8) (0.57) 0.3
6 0.23
The times interest earned ratio indicates the extent of which earnings are
available to meet interest payments. A lower times interest earned ratio
means less earnings are available to meet interest payments and that the
business is more vulnerable to increases in interest rates. In the above case
there is little bit increasing trend.
23
Debt Ratio = Total Debt / Total AssetsYears 2005 2006 2007 2008 2009T.Debt 390,802,199 386,878,165 413,054,505 398,151,379 422,314,124T.Ass. 525,890,428 511,695,319 521,274,041 471,939,720 456,500,677% 74.31% 75.61% 79.24% 84.36% 92.51%
This ratio indicates the firm’s long term debt paying ability. Its increasing trend
is negative. It determines how well creditors are protected in case of
solvency. In the above case there is negative trend.
Debt/Equity Ratio = Total Liabilities/Stockholders EquityYears 2005 2006 2007 2008 2009Total Lib. 390,802,199 386,878,165 413,054,505 398,151,379 422,314,124S. equity 238,196,262 215,727,798 214,416,534 213,167,824 207,086,926Percentage 1.64% 1.79% 1.93% 1.87% 2.04%
This ratio indicates the firm’s long term debt paying ability. Its decreasing
trend is positive. It compares the total debt with the shareholders equity
means how well creditors are protected in case of solvency.
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Net Profit Margin = Net Profit / Net SalesYears 2005 2006 2007 2008 2009Net Pr. 10,479,617 -9,675,986 -16,597,618 -34,431,195 -34,710,098Net Sale 480,959,170 881,353,740 777,391,244 374,912,443 120,619,904% 0.02% -0.01% -0.02% -0.09% -0.29%
This ratio gives a measure of net income Rs. Generated by each Re. of sale.
While it is desirable for this ratio to be high. In the above case quick decrease
which is not favorable.
Total Assets Turnover = Net Sales / Avg. Total AssetsYears 2005 2006 2007 2008 2009Net Sales 480,959,170 881,353,740 777,391,244 374,912,443 120,619,904Avg. T. Ast. 525,890,428 511,695,319 521,274,041 471,939,720 456,500,677
Times 0.0091 0.017
2 0.0149 0.007
9 0.0026
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Total asset turnover measures the activity of the asset and ability of the firm
to generate sales through the use of the assets. In the above case there is
substantial change in the values of ratio.
Return on Assets = Net Income / Avg. Total AssetsYears 2005 2006 2007 2008 2009Net I. 10,479,617 -9,675,986 -16,597,618 -34,431,195 -34,710,098Avg. total Ass 525,890,428 511,695,319 521,274,041 471,939,720 456,500,677
Times 0.0002 (0.000
2) (0.0003) (0.00
07) (0.0008)
Return on asset measures the firm’s ability to utilize its assets to create
profits by comparing profits with the assets that generate the profits. Return
on asset in 2003 decrease substantially in the above case.
Operating Income Margin = EBIT / Net SalesYears 2005 2006 2007 2008 2009EBIT 20,788,965 13,162,653 12,305,271 -8,689,118 -6,593,343Net S. 480,959,170 881,353,740 777,391,244 374,912,443 120,619,904% 0.0432% 0.0149% 0.0158% -0.0232% -0.0547%
The operating income margin include only operating income in the numerator.
In the above case there is continuously decrease 2007 in the operating
income margin percentage.
Operating Asset Turnover = Net Sales / Avg. Operating Ast.Years 2005 2006 2007 2008 2009Net Sales 480,959,170 881,353,740 777,391,244 374,912,443 120,619,904Avg.O.A. 120,150,745 132,186,941 138,056,671 101,264,049 104,175,719Times 0.0400 0.0667 0.0563 0.0370 0.0116
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This ratio measures the ability of operating assets to generate sales rupees.
In the above case values of ratio indicates the substantial decrease.
Return on Operating Assets = Operating Income / Avg. Operating Ass.Years 2005 2006 2007 2008 2009EBIT 20,788,965 13,162,653 12,305,271 -8,689,118 -6,593,343Avg.O.A. 120,150,745 132,186,941 138,056,671 101,264,049 104,175,719Times 0.0017 0.0010 0.0009 (0.0009) (0.0006)
In the above case it indicates a decreasing trend from year 2005 to onward.
DuPont Return on Operating Assets = Operating Income Margin x Operating Assets Turnover
Years 2005 2006 2007 2008 2009OPr. I. Margin 0.0004 0.0001 0.0002 -0.0002 -0.0005Opr. Ass. Turn. 0.0400 0.0667 0.0563 0.0370 0.0116Percentage 0.0108% 0.0022% 0.0028% -0.0063% -0.0472%
Gross Profit Margin = Gross Profit / Net SalesYears 2005 2006 2007 2008 2009GP 26,159,079 50,078,030 28,865,601 811,442 -12,220,450Net Sales 480,959,170 881,353,740 777,391,244 374,912,443 120,619,904Percentage 0.0544% 0.0568% 0.0371% 0.0022% -0.1013%
Sales to Fixed Assets = Net Sales / Avg. Net Fixed AssetsYears 2005 2006 2007 2008 2009Net Sales 480,959,170 881,353,740 777,391,244 374,912,443 120,619,904
A.N.F.A. 405,739,683 379,508,378 383,217,370 370,675,671 352,324,958
Times 0.01 0.02 0.02 0.01 0.00
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This ratio measures the firm’s ability to make productive use of its property,
plant and equipment by generating sales rupees. In the above case the ratio
is substantially lesser because of high net sales.
Degree of Financial Leverage = EBIT / EBTYears 2005 2006 2007 2008 2009EBIT 20,788,965 13,162,653 12,305,271 -8,689,118 -6,593,343EBT 4,488,930 -6,541,546 -13,626,025 -32,556,633 -34,710,098
Times 0.046
3 (0.0201) (0.0090) 0.0027 0.0019
The degree of financial leverage is the multiplier factor by which the net income
changes as compared to the change in EBIT. In the above case there is decreasing
trend means in the year 2006 & 2007 the ratio is negative while in 2008 & 2009 is
positive.
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Operating Cash Flow / Current Maturity of Long Term Debt and Current N/P
Years 2005 2006 2007 2008 2009Op. cash flow 30,483 -6,443 3,494 -33,691 20,057C.M. of LTD & CNP. 125,258 121,568 267,914 180,837 181,395
Times 0.0024 (0.0005)
0.0001
(0.0019)
0.0011
The operating cash flow/current maturities of long term debt and current notes
payable is a ratio that indicates a firm’s ability to meet its current maturities of
debt. The higher this ratio, the better the firm’s ability to meet its current
maturities of debt.
Operating Cash Flow / Total DebtYears 2005 2006 2007 2008 2009Op. C.F. -26,705,135 2,647,468 36,621,152 -37,247,239 -11,530,727Total Debt 390,802,199 386,878,165 413,054,505 398,151,379 422,314,124
Times (0.0007) 0.0001 0.0009 (0.0009) (0.0003)
The Operating cash flow/total debt indicates a firm’s ability to cover total debt
with the yearly operating cash flow. The higher the ratio, the better the firm’s
ability to cover its total debt. In the above case there is significant change in year
2007 then there is decreasing trend in 2008 and 2007 there is considerable
change which shows the firm’s ability to cover its total debt.
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X1 = Working Capital / Total AssetsYears 2005 2006 2007 2008 2009W.C 51,747,649 48,961,714 53,717,179 27,973,856 25,714,142T.A 525,890,428 511,695,319 521,274,041 471,939,720 456,500,677Times 0.0010 0.0010 0.0010 0.0006 0.0006
X2 = Retained Earning / Total AssetsYears 2005 2006 2007 2008 2009R.E. -103,108,033 -90,910,644 -106,196,998 -139,379,483 -172,900,373
T.A. 525,890,428 511,695,319 521,274,041 471,939,720 456,500,677
Times (0.0020) (0.0018) (0.0020) (0.0030) (0.0038)
X3 = EBIT / Total AssetsYears 2005 2006 2007 2008 2009EBIT 20,788,965 13,162,653 12,305,271 -8,689,118 -6,593,343
T.A. 525,890,428 511,695,319 521,274,041 471,939,720 456,500,677
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Times 0.0004 0.0003 0.0002 (0.0002) (0.0001)
X4 = Market Value of Equity / Book Value of Total DebtYears 2005 2006 2007 2008 2009M.V.E. 135,088,229 124,817,154 108,219,536 73,788,341 34,186,553BV. T.D. 390,802,199 386,878,165 413,054,505 398,151,379 422,314,124Times 0.0035 0.0032 0.0026 0.0019 0.0008
X5 = Sales / Total AssetsYears 2005 2006 2007 2008 2009Sales 480,959,170 881,353,740 777,391,244 374,912,443 120,619,904T.A. 525,890,428 511,695,319 521,274,041 471,939,720 456,500,677Times 0.0091 0.0172 0.0149 0.0079 0.0026
Z = .012X1 + .014X2 + .033X3 + .006X4 + .010X5 Years 2005 2006 2007 2008 2009X1 0.000012 0.000011 0.000012 0.000007 0.000007X2 (0.000027) (0.000025) (0.000067) (0.000041) (0.000053)X3 0.000013 0.000008 0.000008 (0.000006) (0.000005)X4 0.000021 0.000019 0.000016 0.000011 0.000005 X5 0.000091 0.000091 0.000149 0.000079 0.000026 Z- score 0.000110 0.000106 0.000118 0.000050 (0.000020)
The overall Performance of Colony Thal Textile mills Limited is not satisfactory.
The company is facing heavy loses from 2006 to onward. After calculating Z-
Score it is concluded that there is great chance of bankruptcy in near feature.
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The Company should try to decrease its receivable days.
The Company should try to improve its inventory turnover ratio.
There is negative trend in working capital ratio which shows our current
liability is greater than our current assts. So company should try to decrease
its liabilities.
If current liabilities exceed current assets, then the company may have
problems meeting its short-term obligations so company should improve its
current ratio.
There is rapid negative trend as the acid test ratio is decreasing company
should also pay attention to improve it.
There is decreasing trend in cash ratio that shows a negative sign. Company
should also focus on its improvement.
The company should improve its investor’s analysis ratios so that the
investors may attract to invest in their company.
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The company should cut down its expenses so that it may earn profit and in
the sense would be able to pay dividend which will also help the company to
attract investors.
The company should take some step toward doing advertisement to get
customer attraction and for increasing sales.
Company cannot convert account receivables into cash quickly. Mostly sales
are on credit basis. So company management should take some corrective
steps to improve it.
Limitations exist in meeting up the demand of textile. Company should
improve its inventory turnover ratio to meet the demand.
Overall the colony thal textile is going in loss. But it is very efficient in some key
areas but this efficiency is little in front of industry standards and other key areas.
As there are good relationship of supplier and this mill so the company should
create a competitive advantage by cutting its expenses and by creating more
profit as by becoming cost leader.
The result f some ratios are negative which is not good also from the investment
perspective. Colony Thal Textile can improve it just by paying some attention on
collecting account receivables in less period of time.
As also the Thal textile Mills is taking corrective actions in some key areas which
will lead the company towards the way of Progress & Prosperity.
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