RATIO ANALYSIS PLAYS AN IMPORTANT ROLE IN BUSINESS GROWTH

2.  IN THE NAME OF ALLAH THE PRAISEWORTHY, THE
PASSIONATE WHOSE BLESSINGS MADE IT
POSSIBLE TO COMPLETE THIS TASK.
 WE ARE VERY MUCH THANKFULL TO THE
SECRETARY OF NML WHO HAS PROVIDED US
ALL THE INFORMATION REGARDING THE
PROJECT.
 WE ARE HIGHLY THANKFULL TO OUR RESPECTED
MA’AM WHOSE GUIDEANCE AND CONSTANT
ENCOURAGEMENT HELPED US TO COMPLTE
THIS RESEARCH REPORT.

4.  We have tried to completely
describe all the elements of the
“NISHAT MILLS LIMITED” in this this
report.
 We have tried to describe the
ratio analysis of “NISHAT MILLS
LIMITED” in all types of last two
years.

5.  PRESENTED BY
MUHAMMAD SALMAN
AWAIS UL HASSAN
 PRESENTED TO
MS: AMMARA YASMIN
 DATE:

6. INTRODUCTION OF
“NISHAT MILLS LIMITED”
VISION
MISSION

7.  Liquidity Ratios
1. Current Ratio
2. Acid test (quick) Ratio
3. Cash Ratio
 Debt Ratios
1. Debt-to-Equity
2. Debt-to-Total-Assets
3. Total Capitalization
 Coverage Ratios
1. Interest Coverage Ratio
 Activity Ratios
1. Receivable turnover Ratio
2. Average Collection Period
(Receivable turnover in Days)
3. Payable turnover Ratio
4. Average Payable Period
(Payable Turnover in Days)
5. Inventory Turnover Ratio
6. Average Age of Inventory
7. Total Assets turnover ratio
 Profitability Ratios
1. Gross Profit Margin
2. Operating Profit Margin
3. Net Profit Margin
4. Return On Investment
5. Return on Equity
 Market/Valuation Ratios
1. Earning per share
2. Price earning ratio
3. Market price per
share/Book value per
share

8.  FLAGSHIP COMPANY ESTABLISHED IN 1951.
 MOST MODERN , BIGGEST COMPOSIT UNIT IN PAKISTAN.
 PROFESSIONAL AND CLIENT ORIENTED MARKETING
STRATEGIES.
 ISO-9001 AND IKO-TEX 100 CERTIFIED
 SA 800 CERTIFICATION IS CURRENTLY IN PROGRESS
 TOTAL EXPERTS FOR THE COMPANY IN THE YEAR 2000
WERE 9.1 BILLION. DUE TO THE APPLICATION OF
MANAGEMENT POLICIES CONSOLIDATION OF
OPERATION A STRONG BALANCE SHEET AND EFFECTIVE
MARKETING STRATEGY THE TREND IS EXPECTED TO
CERTAIN IN THE YEARS OF COME.
 THE COMPANY’S PRODUCTION FACILITIES COMPRISES,
SPINNING, WEAVING, PROCESSING, STITCHING AND
POWER GENERATING.

9.  To transform the Company into a modern and
dynamic yarn, cloth and processed cloth and
finished product manufacturing Company that
is fully equipped to play a meaningful role on
sustainable basis in the economy of Pakistan.

 To transform the Company into a modern and
dynamic power generating Company that is
fully equipped to play a meaningful role on
sustainable basis in the economy of Pakistan.

10.  To provide quality products to customers
and explore new markets to
promote/expand sales of the Company
through good governance and foster a
sound and dynamic team, so as to
achieve optimum prices of products of
the Company for sustainable and
equitable growth and prosperity of the
Company.

11. ASSETS JUNE 30, 2010 JUNE 30, 2009
NON-CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT
INVESTMENT PROPERTIES
LONG TERM INVESTMENTS
LONTERM LOANS
LONGTERM DEPOSITES AND PAYMENTS
11,841,667
132,550
21,959,543
489,803
16,823
34,449,386
11,199,635
41,049
11,952,949
12,367
11,848
23,217,848
CURRENT ASSETS
STORES, SPARE PARTS AND LOOSE TOOLS
STACK IN TRADE (INVENTORIES)
TRADE DEBTS
LOANS AND ADVANCES
SHORT TERM DEPOSITES AND PAYMENTS
OTHER RECEIVABLES (A/R)
ACCRUDE INTEREST
SHORT TERM INVESTMENTS
CASH AND BACK BALANCES
TOTAL ASSETS
688,832
6,060,441
2,041,256
504,046
31,912
724,407
16,906
1,554,543
110,585
11,732,928
46,182,314
561,251
4,092,512
1,300,366
462,025
29,880
323,000
-
1,414,310
111,494
8,294,838
31,512,686

12. EQUITY & LIABILITIES JUNE 30, 2010 JUNE 30, 2009
SHARE CAPITAL AND RESERVES
AUTHORISED SHARE CAPITAL
ISSUED, SUBSCRIBED AND PAID UP SHARE CAPITAL
RESERVES
TOTAL EQUITY
11,000,000
3,515,999
27,860,314
31,376,313
11,000,000
2,424,827
16,905,940
19,330,767
NON-CURRENT LIABILITIES
LONG TERM DEBTS
DEFERRED TEX
2,980,694
1,256,892
4,237,586
2,334,411
245,243
2,579,654
CURRENT LIABILITIES
TRADE AND OTHER PAYABLES (A/P)
ACCRUDE MARKEUP
SHORT TERM BORROWINGS
CURRENT PORTION OF LONG TERM FINANCING
PROVISION OF TAXATION
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
2,139,321
232,247
6,649,447
1,128,632
418,7678
10,568,415
14,806,001
46,182,314
1,309,958
202,777
7,342,600
433,313
313,917
9,062,265
12,181,919
31,512,686

13. Particulars JUNE 30, 2010 JUNE 30, 2009
SALES
COST OF GOODS SOLD
GROSS PROFIT
DISTRIBUTION COST
ADMINISTRATIVE EXPENSES
OTHER OPERATING EXPENSES
OTHER OPRATING INCOME
PROFIT FROM OPERATIONS
FINANCE COST
PROFIT BEFORE TAXATION
PROVISION FOR TAXATION
PROFIT AFTER TAXATION
EARING PER SHARE- BASIC AND DILUTED
31,535,647
(25,555,462)
5,980,185
(1,714,598)
(545,166)
(289,080)
(2,548,844)
3,431,341
981,650
4,412,991
(1,126,922)
3,286,069
(370,608)
2,915,461
10.50
23,870,379
(19,518,838)
4,351,541
(1,315,630)
(435,012)
(191,608)
(1,942,250)
2,409,291
599,006
4,412,991
(1,446,796)
1,561,501
(293,500)
1,268,001
6.23

14.  Liquidity ratios are used to
measure a firm ability to meet
short term obligations.
 They compare short term
obligations with short term (or
current) resources available to
meet these obligations.
 From these ratios, much insight can
be obtained into the present cash
solvency of the firm.

15. Current Ratio
Current Assets
Current Liabilities
NISHAT MILLS LIMITED
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Current Assets 11,732,928 8,294,838
Current Liabilities 10,568,415 12,181,919
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
11,732,928
10,568,415
1.11: 1
8,294,838
12,181,919
.86:1
COMPARISON

16. Acid-Test (Quick)
Current Assets - Inv
Current Liabilities
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Current Assets 11,732,928 8,294,838
Current Liabilities 10,568,415 12,181,919
Inventory 6,060,441 4,092,512
COMPARISON
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
11,732,928 -6,060,441
10,568,415
.53:1
8,294,838-4,092,512
12,181,919
.43:1

17. Cash Ratio
Cash
Current Liabilities
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Cash 110,585 111,494
Current Liabilities 10,568,415 12,181,919
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
110,585
10,568,415
.010:1
111,494
12,181,919
.011:1
COMPARISON

18.  Strong current ratio and weak acid-
test ratio indicates a potential
problem in the inventories account.
 Note that this industry has a
relatively high level of inventories.

19. Balance Sheet Ratios
Financial Leverage Ratios
Shows the extent to which the
firm is financed by debt.

20. PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Total Debts 13,549,109 11,936,676
Stock Holder's Equity 31,376,313 19,330,767
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
13,549,109
31,376,313
.43:1
11,936,676
19,330,767
.61:1
COMPARISON
Debt-to-Equity
Total Debt
Shareholders’ Equity
Nish at MILLS LIMITED

21. Debt-to-Total-Assets
Total Debt
Total Assets
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Total Debts 13,549,109 11,936,676
Stock Holder's Equity 46,182,314 31,512,686
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
13,549,109
46,182,314
.29:1
11,936,676
31,512,686
.37:1
COMPARISON

22. Long Term Debt
Total Capitalization
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Long Term Debts 2,980,694 2,334,411
Stock Holder's Equity 31,376,313 19,330,767
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
2,980,694
31,376,313
.086:1
2,334,411
19,330,767
.107:1
COMPARISON

23. Income Statement Ratios
Coverage Ratios
Ratios that relates the
financial charges
(interest) of a firm to
its ability to service or
cover them.

24. Interest Coverage
EBIT
Interest Charges
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
EBIT 4,061,736 2,938,466
Interest Expense 1,308,396 1,446,796
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
4,061,736
1,308,396
3.10 :1
2,938,466
1,446,796
2.03:1
COMPARISON

25.  Ratios that measure how
effectively the firm is using its
assets are called Activity Ratios.
 Activity ratios, also known as
Efficiency or Turnover Ratio,
measure how effectively the firm
is using its assets.

26. Receivable Turnover
Annual Net Sales
Receivables
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Sales 32,554,012 23,870,379
Accounts Receivables 2,041,256 1,300,366
COMPARISON
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
32,554,012
2,041,256
15.94 times
23,870,379
1,300,366
18.35 times

27. Average Collection Period
Days in the Year
Receivable Turnover
or
Receivables * Days in the year
Annual Credit sales
Nishat mills limited
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
365
15.94
22.58 days
365
18.35
19.16 days

28. Payable Turnover (PT)
Annual Credit Purchases
Accounts Payable
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Purchases 7,405,307 5,517,538
Accounts Payable 2,139,321 1,309,958
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
7,405,307
2,139,321
3.46 times
5,517,538
1,309,958
4.21 times
COMPARISON

29. PT in Days
Days in the Year
Payable Turnover
Or
Accounts payable * Days in the year
Annual Credit Purchases
Nishat mills limited
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
365
3.46
105.49 days
365
4.12
88.59 days

30. Inventory Turnover
Cost of Goods Sold
Avg. Inventory
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Cost of Goods Sold 25,555,462 19,518,838
Inventory 6,060,441 4,092,512
COMPARISON
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
25,555,462
6,060,441
4.12 times
19,518,838
4,092,512
4.762 times

31. PT in Days
Days in the Year
Inventory Turnover
Or
Avg Inventory * Days in the year
CGS
Nishat mills limited
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
365
4.126
85 days
365
4.769
75 days

32. Total Asset Turnover
Net Sales
Total Assets
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Sales 31,535,647 23,870,379
Total Assets 46,182,314 31,512,686
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
31,535,647
46,182,314
.68
23,870,379
31,512,686
.75
COMPARISON

33. Ratios that relate profits to sales
and investment are called
profitability ratios.
Or
Profitability ratios measures that
how much profit the firm generates.
Income Statement/Balance Sheet Ratios
Profitability Ratios

34. Gross Profit Margin
Gross Profit
Net Sales
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Gross Profit 5,980,185 4,351,541
Net Sales 31,535,647 23,870,379
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
5,980,185
31,535,647
18.96%
4,351,541
23,870,379
18.22%
COMPARISON

35. Operating Profit Margin
EBIT
Net Sales
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Operating Profit 4,412,991 3,008,297
Net Sales 31,535,647 23,870,379
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
4,412,991
31,535,647
13.99%
3,008,297
23,870,379
12.60%
COMPARISON

36. Net Profit Margin
Net Profit after Taxes
Net Sales
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Net Profit 2,915,461 1,268,001
Net Sales 31,535,647 23,870,379
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
2,915,461
31,535,647
9.24%
1,268,001
23,870,379
5.31%
COMPARISON

37. Return on Investment
Net Profit after Taxes
Total Assets
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Net Profit After tax 2,915,461 1,268,001
Total Assets 46,182,314 31,512,686
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
2,915,461
46,182,314
6.39%
1,268,001
31,512,686
4.023%
COMPARISON

38. Return on Equity
Net Profit after Taxes
Shareholders’ Equity
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Net Profit after Tax 2,915,461 1,268,001
S.H.E 31,376,313 19,330,767
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
2,915,461
31,376,313
9.29%
1,268,001
19,330,767
6.55%
COMPARISON

39. The ratios which shows the risk and
potential earning of a business
investment.
These ratios are not calculated from the
financial reports only, since they may
involve market data such as share
prices.
It is also known as a Valuation Ratios or
Shareholders ratios.

40. Earning per share
Net Profit after Taxes
Total number of shares
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Net Profit After tax 2,915,461 1,268,001
Total No. of Shares 351,599,848 242,482,654
COMPARISON
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
2,915,461
351,599,848
.oo8
1,268,001
242,482,654
.005

41. Price earning ratio
Market price per share
Earning per share
Nishat mills limited
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Market Price 57.47 30.5
Earning / Share 10.50 6.23
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
57.47
10.50
5.47
30.5
6.23
4.89
COMPARISON

42. M/B
Market price per share
Book value per share
Nishat mills limited
JUNE 30, 2010 RS. JUNE 30, 2009 RS.
57.47
10.50
5.47
PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.
Mkt. /share 57.47
Book Value/ Share 10.50 6.23
COMPARISON

43. 2010 2009
Current ratio 1.11 0.86
Gearing ratio 25.53 34.34
Gross profit % 18.96 18.23
Net profit % (before tax) 10.42 06.54
Earnings per share 10.50 06.23
Proposed dividend % 25.00 20.00

44. CONCLUSION