RATIO ANALYSIS

1. Topic Financial Ratio Analysis of Millat Tractor

2. Presented To : Sir Mohsin Faraz
Group Members
ATEEQ UR REHMAN 26
ASAD ALI 75
JAWAD ALI 51

3. Millat Tractor Limited
 The company is engaged in assembly and
manufacturing of agricultural Tractors, Implements
and Multi-application products.
 Millat is a global group of companies, recognized for a
range of quality products with innovative design
capabilities.
 Date of incorporation June 08, 1964
 Date of commencement of Operations June 15, 1964
 Date of Privatization is Jan 1992

4. Financial Analysis
 Assessment of the firm’s past, present and future
financial conditions
 Done to find firm’s financial strengths and weaknesses
 Primary Tools:
 Financial Statements
 Comparison of financial ratios to past, industry, sector
and all firms

5. Objectives of Ratio Analysis
 Standardize financial information for comparisons
 Evaluate current operations
 Compare performance with past performance
 Compare performance against other firms or industry
standards
 Study the efficiency of operations
 Study the risk of operations

6. Types of Ratios
 Financial Ratios:
 Liquidity Ratios
 Assess ability to cover current obligations
 Leverage Ratios
 Assess ability to cover long term debt obligations
 Operational Ratios:
 Activity (Turnover) Ratios
 Assess amount of activity relative to amount of resources used
 Profitability Ratios
 Assess profits relative to amount of resources used
 Valuation Ratios:
 Assess market price relative to assets or earnings

7. Balance sheet All amount in millions of PKR
Current assets 2015 2014 2013
Cash and short term investment 2,002 1,357 2,765
Total receivable net 1,998 1,661 3,363
Total inventory 2,685 2,673 2,837
Prepaid expenses …… ….. …..
Other current assets total 26 27 30
Total current assets 6,711 5,719 8,996
Property, plant equipment net 766 757 704
Good will net ……. …… …..
Intangible net 3.87 5.89 0.84
Long term investment 975 931 1024
Note receivable long term 1.91 1.94 2.07
Total assets 8,602 7,709 10,966

8. LIABILITIES
Account payable 1,093 829 2,849
Accrued expenses 233 203 198
Other current liabilities 1,720 1,475 2,283
Total current liabilities 3,046 2,507 5,330
Deferred income tax 16 24 23
Minority interest 157 119 106
Long term debt 0 0 0
Other liabilities 11 11 11
Total liabilities 3,229 2,660 5,470
SHAREHOLDER EQUITY
Common stock 443 443 403
Retain earning 4,930 4,606 5,093
Other equity total 0.15 0.23 (0.05)
Total equity 5,373 5,049 5,496
Total liability & equity 8,602 7,709 10,966

9. Income statement In millions of PKR (except for per share items)
REVENUE AND GROSS PROFIT 2015 2014 2013
Total revenue 23,929 17,422 23,324
OPERATING EXPENSES
Cost of revenue total 19,279 14,316 19,207
Selling ,general and admin expenses total 875 794 766
Depreciation 39 28 30
Other operating expenses 66 66 65
Total operating expenses 20,258 15,204 20,067
Operating income 3,671 2,218 3,257
Other net (261) (144) (227)
INCOME TAX AND INTREST
Net income before taxes 3,894 2,244 3,379
Provision for income tax 1,363 803 1,159
Net income after tax 2,530 1,441 2,220
Minority interest (48) (19) (20)
Net income 2,483 1,422 2,200
DPS 53 40 48
EPS 56 32 50

10. Liquidity Ratios
21.2
3046
6711
sLiabilitieCurrent
AssetsCurrent
:RatioCurrent 
Current Ratio:
Years 2015 2014
Current ratio 2.21 2.28
The industrial average is 2.05 .In 2014, the firm’s ability to cover its current liabilities
with its current assets was 2.28. In 2015, the ratio goes down to 2.21 as compared to
2014, which means that the company has the ability to pay its liabilities, as the definition
says that higher the ratio, greater the ability of the firm to pay its bills.

11. Quick/Acid Test Ratio:
Years 2015 2014
Quick ratio 1.32 1.21
3.1
3046
4026
sLiabilitieCurrent
Inventory-AssetsCurrent
:RatioQuick 
The industrial average is 1.22 .According to the definition of Acid Test Ratio,
the company should have the ability to pay its liabilities through its most liquid
assets. The table shows that in 2014, the firm has the ratio 1.21 cents. Then we
observe a slight improvement in 2015.

12. Solvency ratio
Debt to equity Ratio
1:53.0
5373
3229
fundrshareholde
sliabilitietotal
:raioequitydebt to 
Years 2015 2014
Debt to equity ratio 0.61 :1 0.53 :1
Note there is no long term debt so total liability is taken as debt. This ratio
measure the relationship between long term debt and equity in the 2015 the ratio was
0.61 :1 that’s show more secure position there is less chance of bank while in 2014 it
was 0.53 :1 so there is more butter and secure position for outsider .

13. Debt ratio
%52.37100*
8602
3229
assettotal
sliabilitietotal
:raiodebt 
Years 2015 2014
Debt ratio 37.52 % 34.50 %
The ratio shows the company’s ability to cover its debts through its total assets.
The ratio was34.50% in 2014 then goes up in 2015. The ratio has to be low. So we
can interpret that in the year 2015, the risk of the firm is getting higher as the ratio
goes up.

14. Activity ratio
Inventory turnover ratio
18.7
2685
19279
inventoryaverage
operationfromrevenueofcost
ratioturnoverinventory 
Years 2015 2014
Inventory turnover ratio 7.18 times 5.35 times
Inventory turnover ratios deteriorated from 2014 to 2015, which means
that its ability to sell inventory has relatively increase. In 2014 Millat
tractor Ltd had a ratio of 5.35 and in 2015 has a ratio of 7.18.This ratio is
increase as compared to previous years so it indicates a good sign for the
company.

15. Trade receivable turnover ratio
97.11
1998
23929
receivabletradeaverage
operationfromrevenuecreditnet
ratioturnoverreceivable 
It express the relationship between credit revenue from operation and trade receivable
so in 2015 its 11.97 time and in 2014 its 10.48 so our collection is improving and its
good then previous year.
Years 2015 2014
Trade receivable turnover
ratio
11.97 time 10.48times

16. Profitability ratio
Gross profit ratio
%43.19100*
23929
4650
operationfromrevenue
profitgross
profitgross 
Years 2015 2014
Gross profit ratio 19.43% 17.82%
Its indicate the gross margin on product sold in 2015 its 19.43% as compare
to 2014 which is 17.82 % so its increase indicate good sign so its means cost of
revenue from operation decrease