1. BATA SHOES COMPANY
FINANCIAL ANALYSIS OF FIRM FINANCIAL
STATEMENT
Presented by
Imtiaz nawaz #26
Farman hassan #31
Faiz subhani #43
Adeel bashir #46
Umar farooq #142

2. PAKISTAN SHOE INDUSTRY ANALYSIS
Challenges:
 One of the most important problems hindering the growth of footwear
industry is higher energy prices. Increasing energy and inputs prices
leads to an increase in the cost of production that influences the
expected production of the industries and thereby exports.
 Industries do not have footwear training institutes of quality and
repute and in result there is a lack of skilled labor force. Thus there
exists a problem of absorption capacity in advanced machinery.
 Industry is facing high competition from China providing cheaper
footwear product in markets.
 Heavy taxes in the form of sales tax and income tax on retail
businesses.

3.  Outdated production methods are still prevailing in the shoe factories.
 Improper availability of raw material.
 There is no mechanism of collaboration between Industry units and
other related research organization and academic institution to improve
their productivity.
 Transport and utility infrastructure facilities are not adequate.
 Shoe industry in Pakistan is growing rapidly and a lot of companies are
competing for market share so the rivalry among the firms is intense.

4. BATA (PAKISTAN)
Since 1942 Bata Pakistan has been rendering its services to its valued
customers by offering quality products.
It was incorporated in Pakistan as Bata Shoe Company (Pakistan) Limited
in 1951 and went public to become Bata Pakistan Limited in the year 1979.
 Self-concept: Since its inception, the company has not only maintained
a good reputation of manufacturing high quality footwear for all
segments but has also been designing shoes in accordance with the
changing fashions and trends.
 Networking: Bata Pakistan is serving its valued customers through a
strong retail network comprising of more than 400 retail outlets, 467
registered wholesale dealers, 13 wholesale depots, 28 wholesale
distributors and 41 DSP wholesale franchises across the country.
Besides catering local market, Bata Pakistan also shows its presence in
an international footwear market through its export department which is
constantly exploring new potential market in order to earn foreign
exchange.

5. VERTICAL & HORIZONTAL ANALYSIS
Balance sheet (vertical analysis)
Items 2011 2012 2013 2014 2015
Non-current assets
Property plant & equipment 15.86% 14.78% 17.47% 18.84% 17.85%
Intangible asset 0.227% 0.14% 0.077% 0.067% 0.052%
Long term investment 0.79% 0.656% 0.59% 0.51% 0.55%
Long term deposit & payment 0.80% 0.464% 0.368% 0.63% 0.43%
Current asset
Store & spare 0.0044% 0.001% 0.0042%
Stock in trade 48.58% 39.11% 37.06% 36.93% 36.01%
Trade debt unsecure 2.81% 5.98% 5.7% 6.82% 9.57%
Advance is unsecure 0.52% 0.157% 0.44% 0.82% 0.52%
Deposit short payment & other
receivable
7.43% 7.725% 8.17% 7.97% 7.51%
Interest accrued 0.029% 0.089% 0.12% 0.053% 0.027%
Short term investment 2.16% 8.87% 15.15% 15.29% 15.78%
Tax refunds due from govt 11.47% 9.02% 7.96% 6.88% 6.17%
Cash & bank balances 9.32% 13% 6.88% 5.19% 5.53%
Total assets 100% 100% 100% 100% 100%

6. Share capital % reserves
Capital reserve 0.01% 0.0086% 0.0075% 0.0065% 0.0058%
Issue subscribed & paid up
capital
1.63% 1.34% 1.183% 1.02% 0.92%
Revenue reserve 69.21% 68.19% 69.25% 70.07% 72.52%
Noncurrent liabilities
Long term deposits 0.791% 0.656% 0.59% 0.51% 0.55%
Deferred liabilities 1.71% 1.51% 0.85% 0.72% 0.83%
Deferred taxation 0.74% 0.72% 0.78% 0.91% 0.59%
Current liabilities
Trade & other payable 20.43% 21.11% 19.96% 19.68% 17.03%
Short term borrowing
Provision for taxation 5.47% 6.46% 7.37% 7.07% 7.55%
Total liabilities 100% 100% 100% 100% 100%

7. INCOME STATEMENT (VERTICAL ANALYSIS)
Items 2011 2012 2013 2014 2015
sales 100% 100% 100% 100% 100%
cost of sales 63.93% 62.89% 60.9% 60.92% 59.37%
Gross profit 36.07% 37.11% 39.09% 39.07% 40.63%
Distribution cost 18.65% 17.91% 18.59% 18.91% 19.29%
Administrative expenses 6.10% 6.11% 6.4% 6.37% 6.34%
Other operating expenses 0.78% 1.04% 1.15% 1.03% 1.19%
Other operating income 0.43% 0.49% 0.67% 1.18% .62%
Operating profit 10.96% 12.53% 13.63% 13.94% 14.45%
Finance cost 0.52% 0.46% 0.21% 0.22% .21%
Profit before taxation 10.44% 12.07% 13.63% 13.71% 14.21%
taxation 2.82% 3.18% 3.77% 3.98% 4.43%
Profit after taxation 7.6% 8.9% 9.65% 9.73% 9.78%
Other comprehensive income - - - 0.036% (.05%)
Total comprehensive income for
year
7.6% 8.9% 9.65% 9.76% 9.73%
Earnings per share 98.96 135.03 163 177.17 191.20

8. BALANCE SHEET (HORIZONTAL ANALYSIS)
Items 2011 2012 2013 2014 2015
Non-current assets
Property plant & equipment 100% 113.57 152.15 189.76 200.00
Intangible asset 100% 76.28 47.04 46.93 40.56
Long term investment 100% 101.11 103.84 103.84 122.97
Long term deposit & payment 100% 70.65 63.44 125.44 94.75
Current asset
Store & spare 100% 247.00 _ 77.00 343.00
Stock in trade 100% 98.11 105.37 121.45 132.02
Trade debt unsecure 100% 259.13 279.74 387.15 605.94
Advance is unsecure 100% 36.72 115.70 250.59 177.78
Deposit short payment & other receivable 100% 126.73 151.91 171.41 180.08
Interest accrued 100% 443.02 568.71 292.28 171.25
Short term investment 100% 500.00 968.00 1130 1300
Tax refunds due from govt 100% 95.84 95.84 95.84 95.84
Cash & bank balances 100% 170.19 102.11 89.06 105.69
Total assets 100% 121.87 138.11 159.76 178.10

9. Share capital % reserves
Capital reserve 100% 100.00 100.0
0
100.00 100.0
0
Issue subscribed & paid up capital 100% 100.00 100.0
0
100.00 100.0
0
Revenue reserve 100% 120.08 138.1
9
161.77 186.6
2
Noncurrent liabilities
Long term deposits 100% 101.11 103.8
4
103.84 122.9
7
Deferred liabilities 100% 107.25 64.02 67.04 86.80
Deferred taxation 100% 119.41 122.2
5
196.10 142.6
9
Current liabilities
Trade & other payable 100% 125.91 107.1
6
153.88 148.4
9
Short term borrowing 100% _ _ _ _
Provision for taxation 100% 143.98 185.9
7
206.55 245.6
4
Total liabilities 100% 121.87
0
138.11 159.76 178.1
0

10. INCOME STATEMENT (HORIZONTAL ANALYSIS)
Items 2011 2012 2013 2014 2015
Sales 100% 116.91% 130.13% 140.25% 150.58%
cost of sales 100% 115% 123.98% 133.66% 139.85%
Gross profit 100% 120.28% 141.05% 151.92% 169.6%
Distribution cost 100% 123.17% 129.66% 142.2% 141%
Administrative expenses 100% 117.1% 136.41% 146.4% 156.32%
Other operating expenses 100% 155.72% 192.21% 185.1% 229.53%
Other operating income 100% 133.37% 201.28% 383.46% 214.70%
Operating profit 100% 133.71% 161.76% 178.34% 198.08%
Finance cost 100% 104.38% 51.78% 61.33% 59.57%
Profit before taxation 100% 135.18% 167.26% 184.19% 205%
Taxation 100% 131.77% 174.10% 198.13% 236.88%
Profit after taxation 100% 136.44% 164.72% 179% 193.2%
Other comprehensive income - 100% -100%
Total comprehensive income for
year
100% 136.44% 164.72% 179.69% 192.25%
Earnings per share 98.96 135.03 163 177.17 191.20

11. LIQUIDITY OF SHORT TERM ASSET
RELATED DEBT PAYING ABILITY
In 2011 firm has 4.83 days for convert sales into receivable
In 2012 firm has 10.7 days for convert sales into receivable
In 2013 firm has 10.40 days for convert sales into receivable
In 2014 firm has 13.36 days for convert sales into receivable
In 2015 firm has 19.47 days for convert sales into receivable
Account receivable turnover
Liquidity of receivable time per year has decreasing trend ( how much
collection has made year to year)
Ratios 2011 2012 2013 2014 2015
Day sale in
receivable
4.83 10.7 10.40 13.36 19.47
Account
receivable
turnover
128.79 49.12 36.44 31.73 22.88

12. Account receivable turnover in days
This ratio shows turnover in days has increasing year to year which has negative
trend( how days are required to collection )
Days sales in inventory
This ratio shows the length of inventories convert into sales so this trend has
no significant change
Account
receivable
turnover in
days
2.83 7.43 10.02 11.50 15.95
Days sales
in inventory
130.72 111.5 111.11 118.78 123.40
Inventory
turnover
3.33 3.24 3.40 3.27 3.08
Inventory turnover
This ratio shows how much time required to convert into sale. Which has
moderate change in year to year.

13. Inventory turnover in a days
Days to convert into sales also has moderate change.
Operating cycle
This ratio is combination of a/r turnover in a days & inventory turnover
in a days
It is useful to compare period to period ratios for similar firms like service
shows
Inventory
turnover in a
days
109.77 112.6 107.28 110.92 118.46
Operating
cycle
112.6 120.03 117.30 122.42 134.41
Working
capital
2609950 3178932 3460195 3931845 4658537
Working capital
it shows the solvency of the firm so it is increasing period to period

14. Current ratio
It shows debt paying ability of the firm so this firm has better ability because of over 2:1 ratio
acid-test ratio
This ratio relates to most liquid asset to current liabilities minus inventory because of many
reason ( slow moving trend) so it showing the positive trend over period to period
cash ratio
This ratio is used for an extremely conservative point of view if it is high means firm not using
cash and if it is low firm has low paying ability.
So there firm has no significant change ( moderate level)
sale to working capital
It indicates turn over in working capital year to year so in 2011 ratio is 4.12 and than decreasing
in next years means working capital increasing after 2011. it shows less profitable use of
working capital after 2011.
Current ratio 3.18:1 3.04:1 2.98:1 2.99:1 2.99:1
acid-test
ratio
0.55 1.01 1.02 1.02 1.26
cash ratio 0.44 0.79 0.81 0.76 0.87
sale to
working
capital
4.12 3.97 3.85 3.72 3.44

15. FINANCIAL RATIOS
Time interest earned
ratio
21.02
times
26.92
times
65.66
times
61.12
times
69.88
times
Fixed charge coverage
Ratio
21.02
times
26.92
times
65.66
times
61.12
times
69.88
times
Time interest earned ratio
The time interest earned ratio indicate a firms long term debt paying
ability from the income statement
It is relatively low in 2011 and 2012, stable, and high in the next three
years.
Fixed charge coverage Ratio
It is extension of time interest ratio and include rental interest portion in
numerator and denominator.
It is same as fixed interest ratio because Bata Company has no rental
interest

16. Debt ratio
It indicates how many assets creditor finances and it helps to determine of
creditors protection.
It is decreasing in five years from 29% to 26%, which is a good indicator.
Debt to Equity ratio
It is alternative of debt ratio but it include all the liabilities and tell how well
are creditors are protected.
It is less than 50%, which is a good indicator.
Debt to tangible net worth ratio
It is same as last two ratios but it does not include tangible assets because
tangible assets are not providing resources to pay creditors.
It is almost low in all five years.
Debt ratio 29.15% 30.46% 29.56% 28.90% 26.56%
Debt to Equity ratio 41.14% 43.81% 41.96% 40.64% 36.16%
Debt to tangible net
worth ratio
41.27% 43.90% 42% 40.68% 36.18%

17. Financial ratios 2011 2012 2013 2014 2015
Net profit margin 7.6% 8.9% 9.65% 9.76% 9.73%
Total assets turn over 2.23
times
2.24
times
2.12
times
1.99
times
1.89
times
 Net profit margin measure the net income rupee generated by each
dollar of sale. This ratio of years 2011-2015 is increasing respectively
which shows that income rupee generated is increasing respectively
against each rupee of sale
 Total assets turn over measure the activity of assets and the ability
of firm to generate sales through use of assets. This ratio is showing
decreasing trend in five years that shows the ability of firm generating
sale is decreasing but not significantly
PROFITABILITY RATIOS

18. Return on assets 17% 19.9% 20.5% 19.5% 19.4%
Operating income
margin
10.96% 12.5% 13.6% 13.94% 14.4%
Operating assets
turnover
14.38 14.65 13.10 10.97 10.32
 Return on assets measure the firm’s ability to utilize its assets to
create profits by comparing profit with the assets that generate the
profit. This ratio is increasing in first three years and a little
decreasing trend in last two years
 Operating income margin measures the operating income
generated by each rupee of sale. This ratio shows increasing trend
from 2011 to 2015 that’s mean company operating income is
increasing per rupee of sale
 Operating assets turn over measures the ability of operating
assets to generate sales. This ratio is showing decreasing trend
shows that ability of operating assets is decreasing.

19. Return on operating
assets
157.7% 184.6% 178.5% 153.0% 148.9%
Sale to fixed assets 12.78
times
13.32
times
13.24
times
10.33
times
9.73
times
Return on investment 24.92% 23.92% 28.68% 27.08% 25.22%
 Return on operating assets measures the ability of firms utilizes its
operating assets to generate operating income. This ratio shows
increasing trend in in first three years (2011-2013) and decreasing
trend in last two years (2014 & 2015)
 Sale to fixes assets measure the firm’s ability to make productive use
of its assets (plant property equipment etc.) it exclude construction in
progress. This ratio shows increasing trend in in first three years (2011-
2013) and decreasing trend in last two years (2014 & 2015).
 Return on investment measure the income earned on the invested
capital. This ratio shows the average increasing trend of Bata income
on invested capital

20. Return on total equity 24.85% 28.36% 29.22% 27.45% 25.56%
Return on common
equity
24.86% 28.36% 29.22% 27.45% 25.56%
Gross profit margin 36.07% 37.11% 39.09% 39.07% 40.63%
 Return on total equity measures the return on both common and
preferred stock. This ratio shows increasing trend in in first three
years (2011-2013) and decreasing trend in last two years (2014 &
2015)
 Return on common equity measures the return on common
stockholders (residual owners). It shows the same trend as return on
total equity shows because it has no preferred stock.
 Gross profit margin measures the gross profit margin in net sales.
Shows the gross profit of firm increasing respectively on net sales

21. Financial ratios 2011 2012 2013 2014 2015
Financial leverage 2.33 2.00 1.02 1.02 1.01
Earnings per share 13.50 9.89 16.30 17.72 19.03
Price earnings ratio 8.27 10.00 17.13 19.70 17.10
 Financial leverage measures the cost of debts in other words net
income change as compare to change in EBIT this ratio shows the
decreasing trend which states that cost of finance of company is
decreasing
 Earnings per share measures the amount of income earned on each
share of common stock during an accounting period. This shows the
earning per share is increasing of Bata.
 Price earnings ratio measure what is being paid for dollar of recurring
earning. This is showing the increasing trend in 2011-2015
INVESTING RATIOS

22. Percentage of earning
retained
79.37% 49.96 46.40 56.20 55.89
Dividend yield 2.44% 3.71 3.15 2.33 2.69
Dividend payout ratio 20.64% 50.07 53.61 43.81 44.10
Book value 43.36 51.86 59.53 65.52 80.04
Percentage of earning retained measures the proportion current earning retained
for the internal growth. This ratio shows the reducing trend which interprets that Bata
starts retained less cash for growth now
Dividend yield measures the dividend paid rate to total earning. This ratio shows
increasing trend in in first three years (2011-2013) and decreasing trend in last two
years (2014 & 2015)
Dividend payout ratio measures the portion of current earnings per common share
being paid as dividend. This ratio shows increasing trend in in first three years (2011-
2013) and decreasing trend in last two years (2014 & 2015)
Book value per share measures the book value of each outstanding share. Book
value of shares is increasing which shows the strong position of organization

23. Financial ratios 2011 2012 2013 2014 2015
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤/𝑡𝑜𝑡𝑎𝑙 𝑑𝑒𝑏𝑡𝑠 14.05% 90.39% 66.78% 51.09% 54.1%
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 2.5 20.5 16.68 14.43 15.66
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤/𝑐𝑎𝑠ℎ 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 89.9% 414% 190.9% 185.9% 186.5
%
Cash flow ratios
 Operating cash flow/ total debts measures the firm’s ability to cover
total debt with the yearly operating cash flow .This ratio is very low in
2011, in 2012 there was high and relatively good in 2013, 2014 & 2015
 Operating cash flow per share measures the fund flow per common
share outstanding. It is usually higher than earning per share because
deprecation has not been deducted. This ratio is very low in 2011, in
2012 there was high and relatively good in 2013, 2014 & 2015
 Operating cash flow over cash dividend Firms ability to cover cash
dividend through yearly operating cash flow it also show same trend