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.

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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.

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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.

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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)

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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.

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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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