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Sitara limited Ratio Analysis by saniah saleem rao

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The ratio analysis is Sitara Chemical Industries Ltd. The ratio analysis will hold 2011-2015. In the ratio analysis included the different ratio analysis firstly conduct the analysis is a balance sheet ratio analysis, income statement ratio analysis, cash ratio analysis, liquidity ratio analysis, long-term ratio analysis.
All the detail of the company, with full company profile.

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Sitara limited Ratio Analysis by saniah saleem rao

  1. 1. 1 Analysis of Financial Statements Sitara Chemical Industries COMPANY LIMITED Submitted To: Mr. Salman Majeed Submitted By: SaniahSaleem 09 (Q) 7th Semester Department of Management Sciences The Islamia University of Bahawalpur Sub campus: Bahawalnagar
  2. 2. 2 Table of Content Sr No. Contents Page No. 1 Executive summery 3 2 History of Sitara Chemical Industry 4 3 Introduction of Sitara Chemical Company 5 4 Vision and mission 6 5 Product of Company 7 6 Analysis of Balance Sheet 8 8 Analysis of Income Statement 19 9 Ratio Analysis 26 10 Liquidity Analysis 27 11 Activity Analysis 31 12 Lon Term Analysis 34 13 Profitability Analysis 36 17 Qualitative Analysis 38 19 Conclusion and Suggestion 40 20 Annexure 41
  3. 3. 3 Executive summery Summery Sitara Chemical Industries Limited, Its product line includes Caustic Soda solid, sodium hypochlorite, caustic soda liquid, hydrochloric acid, liquid chlorine, Specialty Chemical, Fertilizer polyester Cotton. This is manufacturing company, it’s private limited company, the division of the company is chemical division. It’s a textile division, 343 employees are working there. 17 major product the sub product is three. We done the work to find the ratios Balance sheet ratio analysis, Income statement ratio analysis, or complete ratio analysis in which have a major four ratio analysis. We are analysis the SWOT analysis and analysis some major weakness and threat. In the last we are done suggestion of the company.
  4. 4. 4 History of Sitara Chemical Industry History Sitara chemical industry limited, a unit of Sitara group founded by Haji Abdul Ghafoor (late) and Haji Bashir Ahmed, was established in 1981. SCIL began producing caustic soda in 1985, initially at a rate of 30 MT per day. The plant‘s production capacity was gradually increased over the years to current level of 400MT per day .SCIL produces caustic soda, liquid chlorine and allied products at a chemical complex, situated at 32Km Faisalabad sheik hupura road, Faisalabad. Sitara chemical industry limited is being headed by the honorable Mian Muhammad Adrees as a Chief Executive Officer. SCIL believes in demonstrating its abilities to consistently provide products that meet industrial and consumer requirements. Sitara chemical industry being the largest producer of chlor-alkali products in Pakistan is a reference in employing the world’s latest technology at all times. Sitara Chemical Industries Limited (SCIL) is committed to continual improvement of its environmental management system (EMS) by adoption of appropriate pollution prevention measures and complying with all relevant environmental legislation/ regulations through training, team work and procedures as implemented from time to time.
  5. 5. 5 Introduction of Sitara Chemical Company Introduction Sitara Company Industry Limited was fused in 1981 and started delivering scathing pop in 1985, at first at a rate of 30 metric tons Caustic a day. The plant's ability was bit by bit expanded over the years to the current level of 610 metric tons a day. In option, different by-item offices have been added and extended occasionally to adapt to developing interest. The Organization went into Textile Spinning Business in 1995. Its claim to fame chemicals and fare division was built up in 2001 and agriculture chemicals division in 2003. Sitara Chemical Industries Limited (SCIL) is focused on persistent change of its natural administration framework (EMS) by the reception of suitable contamination counteractive action measures and conforming to all important ecological enactment/directions through preparing, cooperation and methodology as actualized every once in a while.
  6. 6. 6 Vision and mission Vision Strive to develop and employ innovative technological Solutions to add value to businesses with a progressive and proactive approach. Mission Continuing growth and diversification for the bottom Line results with risks well contained.
  7. 7. 7 Product of Company Products 1. Basic Chemicals 2. Specialty Chemicals 3. Gases Names of the products. Basic Chemicals:  Ammonium Chloride  Bleaching Powder  Caustic Soda Flakes  Caustic Soda Liquid (32-50 %)  Caustic Soda Solid  Hydrated Lime  Hydrochloric Acid  Liquid Chlorine  Sodium Hypochlorite Specialty Chemicals:  Aluminium Sulphate  Calcium Chloride Dihydrate  Copper (I) Chloride  Ferric Chloride  Magnesium Carbonate  Nickel Chloride Hexahydrate  Calcium Chloride (Prills) Gases  Carbon Dioxide
  8. 8. 8 BALANCE SHEET ANALYSIS
  9. 9. 9 Sitara Chemical COMPANY LIMITED ANALYSIS OF BALANCE SHEET AS ON DECEMBER, 2011-2015 Current Assets: Cashand Bank Balance: Years 2011 2012 2013 2014 2015 Cash and Bank Balance 140,776,990 7 9,861,668 279,534,490 436,767,468 256,977,410 Vertical Analysis 7% 3% 9% 12% 6% Interpretation: For past five years we can without much of a stretch watch that the adjust of money is diminishing which demonstrates the organization's best administration of money likewise convey that organization never held sit still money (better money administration). Trade Debts: Years 2011 2012 2013 2014 2015 Trade Debts 512,397,911 796,202,867 936,929,485 1,262,557,632 1,187,078,233 Vertical Analysis 22% 29% 31% 35% 27% Interpretation: Exchange obligations are expanded in 2014 which implies our credit deals is expanding yet next three years our exchange obligations were abatement on the grounds that our normal gathering period is diminishing and we fix our credit deal approach.
  10. 10. 10 Deposits and Prepayment: Years 2011 2012 2013 2014 2015 Deposit & prepayment 7,036,816 6 ,680,502 9,612,725 8,567,010 7,777,958 Vertical Analysis 30% 0.2% 32% 24% 17% Interpretation: In the first year company paid the high amount to the supplier and stack holders in the advances. In 2012 the least amount company paid to the supplier and stack holders in the advanced. The last three year the average amount paid but the last yea company will again start to maintain it. Loans and Advances: Years 2011 2012 2013 2014 2015 Loans and Advances 311,576,542 4 37,603,208 255,915,080 413,258,969 1,658,999,791 Vertical Analysis 14% 16.1 8.5% 11.4% 37% Interpretation: Because of the better position of the organization from the year, 2015 and increment in deal and net benefit organization can give here and now advance and advances to the representatives and different providers.
  11. 11. 11 Stock in Trade: Interpretation: Stock in public expos that its sum is expanded in 2011 because of completed great. Organization can held vast sum as completed products yet in next two years 2012 and 2013 it is ordinary yet in 2015 organization held a slightest load of complete merchandise. Stores and Spares: Interpretation: Under this heading as expanding pattern demonstrates that organization holding free instruments and day by day utilize oils and oils as creation expanded with the goal that organization need to hold such things in adequate amount. Others Receivables: Years 2011 2012 2013 2014 2015 Stock in Trade 885,083,340 9 02,720,830 1,010,809,125 881,710,696 717,460,100 Vertical Analysis 39% 33% 34% 24% 16% Years 2011 2012 2013 2014 2015 Stores and Spares 279,947,941 3 66,962,117 336,360,277 401,165,384 380,378,519 Vertical Analysis 12% 13.5% 11% 11% 8.5%
  12. 12. 12 Interpretation: From year 2011 and 2014 different receivables like receivables from providers and workers was diminishing which indicates organization better gathering administration however it again expanded in 2013 yet in the time of 2015 the receivables again diminishing. From the year 2011-2015 the proportion is not up to 1%. Total Current Assets: Interpretation: The general position of the present resources demonstrates that there is having diminished in 2012 and 2015 however again organization's aggregate streams expanded from 2011 and 2013 because of consideration of Deposits and Prepayments, Loans and Advances. Again 2014 will expanded in the high sum. Non-current Assets: Long Term Investments: Years 2011 2012 2013 2014 2015 Others Receivables 7,773,380 9 ,079,166 16,599,019 5,901,655 11,726,462 Vertical Analysis 0.3% 0.4% 0.6% 0.1% 0.3% Years 2011 2012 2013 2014 2015 Current Assets 2,293,235,870 2 ,715,289,032 3,008,549,505 3,601,755,335 4,446,080,341 Vertical Analysis 58% 6.3% 73% 87% 1%
  13. 13. 13 Interpretation: From past year the condition of company is going to the same level. Long Term Deposits, Prepayments: Interpretation: In first years 2011 organization put resources into long haul stores yet from 2012 organization changed its arrangement and began interests in here and now Deposits and Prepayments. Long Term Loans and Advances: Years 2011 2012 2013 2014 2015 Long Term Investments 96,480,134 67,607,937 63,431,202 63,431,202 99,192,142 Vertical Analysis 1% 1% 1% 1% 1% Years 2011 2012 2013 2014 2015 Long Term Deposits. 108,128,850 110,296,726 110,432,287 110,432,287 110,433,287 Vertical Analysis 1.3% 10% 11% 12% 11% Years 2011 2012 2013 2014 2015 Long Term loan and advances. 840,659,837 827,493,584 819,302,966 817,876,172 1,265,059,329
  14. 14. 14 Interpretation: The organization began giving long haul credits and advances to the providers and workers because of that reason organization's long haul advances and Advances are expanded with the progression of time particularly in 2015 there is diminishing from the year 2012-2014. In any case, it's keep up they don't down additional. TotalNon- Current Assets: Interpretation: It the calculation of all above citation non- current assets. They are contributing in making total assets. They are stable in last five years. TotalAssets: Interpretation: Vertical Analysis 11% 8% 8% 8% 13% Years 2011 2012 2013 2014 2015 Total Non- Current Assets 8,001,028,528 10,165,371,942 9,950,437,686 9,784,655,301 9,997,843,214 Vertical Analysis 70% 79% 77% 73% 69% Years 2011 2012 2013 2014 2015 Total Assets 11,472,264,398 12,880,660,974 12,958,987,191 13,386,410,636 14,443,923,555 Vertical Analysis 100% 100% 100% 100% 100%
  15. 15. 15 Add up to resources are the total of current resources non-current resource and settled resources. As we see that there is no expansion and diminishing in these heads so our aggregate resources are steady amid most recent five years. Liabilities and Owners Equity: Current Liabilities: Current portion of long term financing: Interpretation: Organization developing its long haul obligations in initial four years and lessening its liabilities in 2015. Organization again has a less add up to develop. Trade and Other Payables: Creditors: Years 2011 2012 2013 2014 2015 Current portion of long term financing 954,033,710 862,779,540 657,250,376 690,278,947 280,357,144 Vertical Analysis 24% 20% 16% 17% 7%
  16. 16. 16 Interpretation: In initial two years organization pay to the leasers however in 2013company has more risk towards the banks yet in 2011-2012 organization paid its obligation and decreases the adjust. TotalCurrent Liabilities: Interpretation: The general position of current liabilities demonstrates that in 2011 and 2012 organization expanded its present obligation however in 2013-2014 it's a stable and in 2015 the liabilities lessened. TotalCurrent Liabilities: Year 2011 2012 2013 2014 2015 Trade and Other Payables 1,356,248,460 1,522,591,422 1,828,764,814 1,690,647,587 2,121,584,542 Vertical Analysis 34% 36% 44% 41% 49% Year 2011 2012 2013 2014 2015 Total Current Liabilities 11,472,264,398 12,880,660,974 12,958,987,191 13,386,410,636 14,443,923,555 Vertical Analysis 34% 33% 32% 32% 28% Year 2011 2012 2013 2014 2015 Total Non- Current 2,824,812,215 2,732,005,569 2,047,311,132 1,776,277,772 1,952,385,658
  17. 17. 17 Interpretation: The aggregate non-current liabilities diminishes because of reduction in getting credit and finances from pariahs and running business with claim capital. That is the reason add up to non-current liabilities are diminishing. Owner’s EQUITY: Reserves: Interpretation: In first years reserves increases due to general reserve and after that it is decreased due to use of specific reserve. Total Owner’s Equity: Liabilities Vertical Analysis 25% 21% 17% 13% 14% Year 2011 2012 2013 2014 2015 Reserves 1,332,211,601 1,338,984,262 1,382,095,241 1,410,102,556 1,363,581,652 Vertical Analysis 35% 30% 26% 23% 20% Year 2011 2012 2013 2014 2015 Total Owner’s 3,786,411,020 4,402,885,955 5,347,168,856 6,102,089,608 6,892,188,396
  18. 18. 18 Income STATEMENT ANALYSIS Interpretation: The over-all position of liabilities and owner equity is stable over the years and the liabilities and owner equity is continuously increased. Sitara Chemical Indutries LIMITED ANALYSIS OF INCOME STATEMENT FOR THE YEAR ENDED Net Sales: Equity Vertical Analysis 33% 34% 41% 46% 48%
  19. 19. 19 Interpretation: A deal speaks to income from merchandise or administrations sold to clients. The firm procure income from the offers of essential items. Deals are re more often than not demonstrated net of any markdown, returns, and remittances. They stables from the past 5 years. Costof Manufacture: Interpretation: As raw material consumed, salaries and wages and fuel and power are increased cost of goods manufactured because it is a function of all these items. So cost of goods manufactured increased as sales increased. Gross Profit: Year 2011 2012 2013 2014 2015 Net Sales 6,216,879,954 7,463,926,517 8,099,794,812 8,807,482,117 8,722,879,814 Vertical Analysis 100% 100% 100% 100% 100% Year 2011 2012 2013 2014 2015 Cost of Manufacture 4,883,737,562 5,233,665,895 5,681,733,225 6,487,777,545 7,165,278,592 Vertical Analysis 75% 72% 69% 76% 82% Year 2011 2012 2013 2014 2015 Gross Profit 1,553,641,041 2,069,987,192 2,504,871,916 2,139,111,143 1,571,680,914
  20. 20. 20 Interpretation: In the start of the two year 2011-2012 the Gross profit is not increasing. Time to time the Gross profit will be increase. Administration Expenses: Interpretation: Administrating expenses decreases because company focus on selling and after few year Administrating expenses again increase. TotalOperating Expenses: Vertical Analysis 25% 28% 69% 76% 82% Year 2011 2012 2013 2014 2015 Administration Expenses 42,653,372 38,386,400 32,768,795 55,427,316 632,761,496 Vertical Analysis 4% 3% 5% 4% 5% Year 2011 2012 2013 2014 2015 Total Operating Expenses 42,088,096 88,450,365 98,157,980 97,891,659 82,637,992 Vertical Analysis
  21. 21. 21 Interpretation: As selling and administrating expenses is decrease in the start after passing the year in 2013-2014 they increase and again decrease. Finance cost: Interpretation: In the start 2011 the finance cost will increased after the time period they decreased and 2015 they decrease more. Profit before taxation: 0.64% 0.92% 1.15% 1.05% 0.94% Year 2011 2012 2013 2014 2015 Finance Cost 1,078,065,020 1,124,322,227 1,161,649,775 1,048,725,239 1,091,999,443 Vertical Analysis 11% 9% 6% 5% 4% Year 2011 2012 2013 2014 2015 Profit before taxation 518,229,393 984,051,365 1,375,990,936 1,145,813,220 1,112,442,967 Vertical Analysis 4% 13% 17% 13% 13%
  22. 22. 22 Interpretation: Profit Before Taxation in the starting year 2011 they will decrease because they paying the more tax after the year they stable and start increasing from the year 2013 they then again reduced but they stable. Provisionfor taxation: Interpretation: Provision for taxation in the start they decrease because most of the fund are paid. After the time spend these duties and fund will stable, the time which they stable from the year 2012-2014 after the ended year 2014 they decrease. Profit for the year: Interpretation: Year 2011 2012 2013 2014 2015 Provision for taxation 90,238,072 295,569,418 338,867,640 284,639,086 126,011,653 Vertical Analysis 2% 4% 4% 3% 2% Year 2011 2012 2013 2014 2015 Profit for the year 427,991,321 688,481,947 1,037,123,296 861,174,134 986,431,314 Vertical Analysis 7% 9% 13% 10% 12%
  23. 23. 23 RATIO ANALYSIS In the start of the year 2011, this is the starting year that’s why profit is not more. After the passage of the time they profit of the year is increase.
  24. 24. 24 Ratio Analysis Ratio Analysis Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that the strengths and weaknesses of a firm, as well as its historical performance and current financial condition, can be determined. A single ratio in itself is meaningless because it does not furnish a complete picture. A ratio becomes meaning full when compared with other standard and the ratio of the other years. So the ratios of Packages limited have been calculated by me and I compared it with the standards and the ratio of other years. Purpose: The purpose of ratio analysis depends upon the event for which the analysis is made. The following paragraph briefly explains the purpose of ratio analysis: ‘Management’ would like to know the operational efficiency and would think of such ratios as return on investment, turnover of fixed assets, net profit to sales etc. While ‘Creditors’ would like to know the ability of the company to meet it current obligations and, therefore, would think of current and liquid ratios, turnover of receivables, coverage of interest by the level of earnings, etc. and on the other side, ‘Investors’ will be interested in such ratios as earnings per share, book value per share and dividends per share etc. Classification of Ratios: Ratios may be classified in a number of ways keeping in view the particular purpose. To achieve the above purposes effectively, ratios may be classified as;  Liquidity ratio.  Activity ratio  Long term analysis  Profitability ratio.
  25. 25. 25 Liquidity ratios Liquidity ratios The liquidity of a business firm is measured by its ability to satisfy its short-term obligations as they come due. Liquidity refers to the solvency of the firm’s over all financial position the case with which it can pay its bills. Current Ratios “Current ratio shows the liquidity position of the company. It shows how well the company can meet its liquidity requirements and fulfills the cash demands of its creditors” Interpretation: It shows a firm’s ability to cover its current liabilities with its current assets. The current ratio of the Company is low according to the standard. It should be 2: 1 for a medium size business. So management should take steps to improve the current ratio. PRs. (000) Current Ratio = Current Assets / Current Liabilities 2011 2012 2013 2014 2015 Current Assets 2293235 2715289 3008550 3601755 4446080 Current liabilities 3940420 4279703 4135006 4160634 4293654 Current ratio 0.58 0.63 0.73 0.87 1.04
  26. 26. 26 Quick Ratio: “This ratio concentrates on the more liquid current assets-Cash, Marketable Securities, and receivables- in relation to the current liabilities/ current obligations and shows immediate solvency of the company.” PRs. (000) Quick Ratio = (Cash+MS+AR) / Current Liabilities 2011 2012 2013 2014 2015 (Cash+MS+AR) 297193 205120 458922 634496 469768 Current Liabilities 3940420 4279703 4135006 4160634 4293654 Quick Ratio 0.08 0.05 0.11 0.15 0.11 Interpretation: It shows a firm’s ability to cover its current liabilities with its quick assets. The current ratio of Industries is low according to the standard. It should be 1: 1 for a medium size business. So management should take steps to improve the quick ratio. CashRatio PRs. (000) Cash Ratio = Cash +MS / Current Liabilities 2011 2012 2013 2014 2015 Cash + MS 289420 196041 442323 628594 458042 Current Liabilities 3940420 4279703 4135006 4160634 4293654 Cash Ratio 0.07 0.05 0.11 0.15 0.11
  27. 27. 27 CashFlow from Operating Ratio PRs. (000) Cash flow from operating ratio = Cash flow from operation / Current Liabilities 2011 2012 2013 2014 2015 Cash flow from operation 1,695,99 7 2,149,53 9 2,524,41 3 2,098,40 7 1,383,16 9 Current Liabilities 2239905 2849608 3750780 4477693 5314313 Cash flow from operating ratio 0.76 0.75 0.67 0.47 0.26 Operating Cycle PRs. (000) Operating Cycle = AR in days + Inventory in days 2011 2012 2013 2014 2015 AR in days 29.67 38.40 41.64 51.61 48.99 Inventory in days 68.33 60.25 65.04 47.60 36.12 Operating Cycle 98.00 98.65 106.68 99.21 85.11 CashCycle PRs. (000) Cash Cycle= Operating Cycle - AP in days
  28. 28. 28 2011 2012 2013 2014 2015 Operating Cycle 98.00 98.65 106.68 99.21 85.11 AP in days 273.48 344.58 399.01 315.95 462.58 Cash Cycle -175.48 -245.93 -292.33 -216.75 -377.47 Work in Capital PRs. (000) Work in Capital = Current Assets - Current Liabilities 2011 2012 2013 2014 2015 Current Assets 2293236 2715289 3008550 3601755 4446080 Current Liabilities 3940420 4279703 4135006 4160634 4293654 Work in Capital -1647184 -1564414 -1126456 -558879 152426 Activity Analysis Activity Analysis Activity ratios can be used to assess the speed with which current accounts, inventory, accounts receivable and accounts payable are converted into sales or cash. Account Receivable Turnover
  29. 29. 29 PRs. (000) AR Turnover = Net Sales / Avg. Trade (AR) 2011 2012 2013 2014 2015 Net Sales 6216880 7463927 8099795 8807482 8722880 Avg. Trade (AR) 512398 796203 936929 1262558 1187078 AR Turnover 12.13 9.37 8.65 6.98 7.35 Account Receivable in Days PRs. (000) AR in days = 360 / AR Turnover 2011 2012 2013 2014 2015 360 360 360 360 360 360 AR Turnover 12.13 9.37 8.65 6.98 7.35 AR in days 29.67 38.40 41.64 51.61 48.99 Inventory Turnover This ratio establishes relationship between cost of sold during a given period and the average amount of inventory held during that period. This ratio reveals the number of times finished stock is turned over during a given accounting period. In general, a high inventory turnover ratio is better than a low ratio. A high ratio implies good inventory management.
  30. 30. 30 PRs. (000) Inventory Turnover = CGS / Avg. Inventory 2011 2012 2013 2014 2015 CGS 4663239 5393939 5594923 6668371 7151199 Avg. Inventory 885083 902721 1010809 881711 717460 Inventory Turnover 5.27 5.98 5.54 7.56 9.97 Inte rpre tatio n: This ratio tells us how many days, on average, before inventory is turned in to accounts receivable through sales. Transforming the industry’s median inventory turnover is 9.97. Inventory Turnover in days PRs. (000) Inventory Turnover in days = 360 / Inventory Turnover 2011 2012 2013 2014 2015 360 360 360 360 360 360 Inventory Turnover 5.27 5.98 5.54 7.56 9.97 Inventory Turnover in days 68.33 60.25 65.04 47.60 36.12 Working Capital Turnover PRs. (000) Working Capital Turnover = Net Sales / Working Capital 2011 2012 2013 2014 2015 Net Sales 6216880 7463927 8099795 8807482 8722880 Working capital - - - -558879 152426
  31. 31. 31 1647184 1564414 1126456 Working Capital Turnover -3.77 -4.77 -7.19 -15.76 57.23 Account Payables Turnover PRs. (000) AP Turnover = Purchases / Avg. AP 2011 2012 2013 2014 2015 Purchases 1785310 1590729 1649965 1926346 1651110 Avg. AP 1356248 1522591 1828765 1690648 2121585 AP Turnover 1.32 1.04 0.90 1.14 0.78 Account Payables Turnover in Days PRs. (000) AP Turnover in Days = 360 / AP Turnover 2011 2012 2013 2014 2015 360 360 360 360 360 360 AP Turnover 1.32 1.04 0.90 1.14 0.78 AP Turnover in Days 273.48 344.58 399.01 315.95 462.58 Long term analysis Long term analysis To cheek the firm long term debt paying capacity  Income / Cash generating Point of view  Going concern point of view  Liquidity point of view Income / Cashgenerating Point of view Whether the project is able to liquidate the debt or self-liquidate.
  32. 32. 32 Time Interest Earned Ratio The time interest earned ratio measures the ability to make contractual interest payments PRs. (000) Time Interest Earned Ratio = EBIT / Interest Expense 2011 2012 2013 2014 2015 EBIT 1221723 1666922 1862820 1550765 1445685 Interest Expense 703494 682871 486829 404952 333242 Time Interest Earned Ratio 1.74 2.44 3.83 3.83 4.34 Inte rpre tatio n: The higher the value of this ratio, the better able the firm is fulfill its interest obligations. Going Concern point of view Debt Ratio The debt ratio measures the proportion of total assets financed by the firm’s creditors. PRs. (000) Debt Ratio = Total Liabilities / Total Assets 2011 2012 2013 2014 2015 Total Liabilities 6765232 7011709 6182317 5936912 6246040
  33. 33. 33 Total Assets 11472264 12880661 12958987 13386411 14443924 Debt Ratio 0.59 0.54 0.48 0.44 0.43 Inte rpre tatio n: This indicates the firm this year has financed 43 % of its assets with debts. The higher this ratio, the more financial leverage the firm has. Debt / Equity Ratio The debt equity ratio indicates the relationship between the long-term funds provided by creditors and those provided by the firm’s owners PRs. (000) Debt / Equity Ratio = Log term Debt / Capitalization 2011 2012 2013 2014 2015 Long Term Debt 1334776 734475 566071 858001 Capitalization 5596654 5737662 6081644 6668161 7750189 Debt / Equity Ratio 0.00 0.23 0.12 0.08 0.11 Inte rpre tatio n: The standard debt equity ratio is 60:40. The lower debt equity ratio is preferable.
  34. 34. 34 Profitability Analysis Profitability Analysis A firm’s profitability can be assessed relative to sales, assets, and equity or share value. Gross Profit Margin The gross profit margin measures the percentage of each sales dollar remaining after the firm has paid for its goods. The higher the gross profit margin the better and the lower the relative cost of merchandising sold and vice versa. PRs. (000) Gross Profit Margin =Gross Profit / Sale 2011 2012 2013 2014 2015 Gross Profit 1553641 2069987 2504872 2139111 1571681 Sale 6216880 7463927 8099795 8807482 8722880 Gross Profit Margin 24.99 27.73 30.93 24.29 18.02 Interpretation: The CGS has decreased due to more efficient use of RM, less wastage of material. Operating Profit Margin It measures the percentage earned on each sales dollar before interest and taxes. PRs. (000) Operating Profit Margin = Operating Profit / Sale 2011 2012 2013 2014 2015 Operating Profit 1221723 1666922 1862820 1550765 1445685 Sale 6216880 7463927 8099795 8807482 8722880 Operating Profit Margin 19.65 22.33 23.00 17.61 16.57
  35. 35. 35 Net Profit Margin It measures the percentage of each sales dollar remaining after all expenses, including taxes, have deducted. PRs. (000) Net Profit Margin = Net Profit / Sale 2011 2012 2013 2014 2015 Net Profit 427991 688482 1037123 861174 986431 Sale 6216880 7463927 8099795 8807482 8722880 Net Profit Margin 6.88 9.22 12.80 9.78 11.31 Inte rpre tation: In 2011 the company earn profit 6.8 % and 2015 the company earns profit 11.31%, which is high.
  36. 36. 36 SWOT Analysis SWOT Analysis
  37. 37. 37 Strength:  Largest manufacture caustic soda.  Largest Shareholder of the company  Use the advance technology  The good and efficient plant infrastructure  Strong Management of the industry  The strong brand name and strong image.  Great financially sound Weakness:  Need Considerable Market to Sustain  Lack of Operations in Abroad  Relying on Permanent Customers Opportunity:  Increase Production Capacity  Increase Product Line  Taking Advantage of Geographic position  Provide Online Customer Service Ordering System Thereat:  Strong competitors and new strategies of competitors.  Economic Environment and new polices of every year and every five year.  Energy Crises  Threat of Stakeholders  Unstable Law & Order Situation Conclusion and Suggestion Suggestion
  38. 38. 38  For the Market Development, it is opportunity for them to export their product in new markets.  Sitara Chemical Industry must involve employees in decision making.  Increase the Basic salary of its employees to increases their motivations.  Avoid more credit Purchases.  Control the Cost of product with the use of Advance Technology. Conclusion:  After the completion of ratio analysis, we have concluded that the Industry has good will in market but this year some profitability ratios decreased and some increased as compare to previous year plus E P S. It’s means that the company has to take measures to maintain its position  But still there is some room for improvement in compensation system, and employment Planning. Annexure Sitara Chemical Industries Limited Balance Sheet
  39. 39. 39 As on june 30, 2011-2015 Rs. (000) 2011 2012 2013 2014 2015 ASSETS current assets Stores, spare parts and loose tools 279,947,94 1 3 66,962,117 336,360,27 7 401,165,38 4 380,378,51 9 stock in trade 885,083,34 0 9 02,720,830 1,010,809,1 25 881,710,69 6 717,460,10 0 Trade debts 512,397,91 1 7 96,202,867 936,929,48 5 1,262,557,6 32 1,187,078,2 33 Loans and advances 311,576,54 2 4 37,603,208 255,915,08 0 413,258,96 9 1,658,999,7 91 Trade deposits and prepaymen ts 7,036,816 6 ,680,502 9,612,725 8,567,010 7,777,958 Other receivables 7,773,380 9 ,079,166 16,599,019 5,901,655 11,726,462 Other financial assets 148,642,95 0 1 16,178,674 162,789,30 4 191,826,52 1 201,064,59 7 Cash and bank balances 140,776,99 0 7 9,861,668 279,534,49 0 436,767,46 8 256,977,41 0 Advance sales tax 0 0 0 0 24,617,271 Total Current Assets 2,293,235,8 70 2 ,715,289,03 2 3,008,549,5 05 3,601,755,3 35 4,446,080,3 41 Non-current assets Property, plant and equipment 5,378,904,0 86 6,339,937,3 35 6,068,941,9 31 5,765,295,5 02 5,790,535,7 75 Investment property 1,576,855,6 21 2,820,036,3 60 2,868,379,3 00 3,004,815,3 78 2,716,463,1 81 Long term investments 96,480,134 67,607,937 63,431,202 63,431,202 99,192,142 Long term 840,659,837 827,493,584 819,302,966 817,876,172 1,265,059,3
  40. 40. 40 loans and advances 29 Long term deposits 108,128,850 110,296,726 110,432,287 110,432,287 110,433,287 Intangible Assests 0 0 19,950,000 17,955,000 16,159,500 Total NON- Current Assets 8,001,028,5 28 10,165,371, 942 9,950,437,6 86 9,784,655,3 01 9,997,843,2 14 Non- current assets classified as held for sale 1,178,000,0 00 0 0 0 0 3,471,235,8 70 0 0 0 0 Total Assets 11,472,264, 398 12,880,660, 974 12,958,987, 191 13,386,410, 636 14,443,923, 555 EQUITY AND LIABILIT IES Equity Share capital 214,294,070 214,294,070 214,294,070 214,294,070 214,294,070 Reserves 1,332,211,6 01 1,338,984,2 62 1,382,095,2 41 1,410,102,5 56 1,363,581,6 52 Un- appropriate d profits 2,239,905,3 49 2,849,607,6 23 3,750,779,5 45 1,410,102,5 56 5,314,312,6 74 3,786,411,0 20 4,402,885,9 55 5,347,168,8 56 6,102,089,6 08 6,892,188,3 96 surplus revaluation of property, plan & Equipment 920,621,624 1,466,066,4 73 1,429,500,9 37 1,347,409,6 08 1,305,695,7 30 Current liabilities Trade and 1,356,248,4 1,522,591,4 1,828,764,8 1,690,647,5 2,121,584,5
  41. 41. 41 other payables 60 22 14 87 42 Profit / financial charges payable 120,376,568 92,938,164 70,245,987 1,690,647,5 87 55,225,614 Short term borrowings 1,269,000,0 00 1,544,904,2 14 1,529,449,7 55 1,682,644,3 23 1,836,486,4 71 Current portion of long term financing 954,033,710 862,779,540 657,250,376 690,278,947 280,357,144 Provision for taxation 218,292,60 9 240,420,88 1 16,870,962 0 0 Sales tax payable 22,468,192 16,068,756 32,424,372 36,596,986 0 3,940,419,5 39 4,279,702,9 77 4,135,006,2 66 4,160,633,6 48 4,293,653,7 71 Non-current liabilities Long term financing 1,810,242,7 86 1,334,775,7 46 734,474,87 3 566,070,92 6 858,000,82 4 Long term deposits 10,518,651 1 2,199,953 7,946,055 6,385,859 9,920,553 Deferred liabilities 1,004,050,7 78 1 ,385,029,87 0 1,304,890,2 04 1,203,820,9 87 1,084,464,2 81 2,824,812,2 15 2,732,005,5 69 2,047,311,1 32 1,776,277,7 72 1,952,385,6 58 24.6229699 5 21.2101349 15.7983884 2 13.2692610 5 13.5170035 4 Contingenci es and commitme nts Total equity and liabilities 11,472,264, 398 12,880,660, 974 12,958,987, 191 13,386,410, 636 14,443,923, 555
  42. 42. 42 Sitara Chemical Industries Limited Income Statement As on june 30, 2011-2015 Rs(000) 2011 2012 2013 2014 2015 Sales - net 6,216,879,9 54 7,463,926,5 17 8,099,794,8 12 8,807,482,1 17 8,722,879,8 14 Cost of good sales Raw material consumed 1,673,402,2 52 1,428,802,0 63 1,679,007,0 02 2,034,133,6 44 1,827,288,0 40 Fuel & Power 2,260,610,8 37 2,791,620,3 01 2,880,940,6 64 3,242,839,8 16 4,049,773,1 97 Salaries & wages 235,839,94 6 237,042,04 5 227,037,22 7 265,572,21 9 300,541,06 4 stores & spare 138,385,61 4 156,410,51 9 279,109,74 6 283,001,42 9 400,615,76 5 Repair & maintenace 70,736,851 48,923,184 27,425,710 47,344,556 44,256,132 vehicle running & maintaines 25,856,606 33,890,232 568,157 1,761,274 2,152,230 Travelling & conveyance 19,096,172 26,794,940 25,083,301 26,717,274 25,095,007 Insurance 18,165,028 20,009,119 15,621,686 17,462,433 17,328,749 Depreciation 487,173,41 5 456,041,46 6 547,485,38 5 524,397,44 6 490,438,74 4 others 4,691,122 7,602.65 1,226,169 4,075,196 3,841,793 Amortization 0 0 1,050,000 1,995,000 1,795,500 4,933,957,8 43 5,207,136,5 21 5,684,555,0 47 6,449,300,2 87 7,163,126,2 21 work in process opening stock 22,218,508 72,438,789 45,909,415 48,731,237 10,253,979 closing stock -72,438,789 -45,909,415 -48,731,237 -10,253,979 -8,101,608 -50,220,281 26,529,374 -2,821,822 38,477,258 2,152,371 cost of goods manufacture 4,883,737,5 62 5,233,665,8 95 5,681,733,2 25 6,487,777,5 45 7,165,278,5 92 Finished stock
  43. 43. 43 opening stock 211,499,58 9 432,161,82 4 314,400,85 5 448,708,70 8 465,874,79 8 finished goods purchased 0 42,512,461 47,497,524 197,759,51 9 0 closing stock - 432,161,82 4 - 314,400,85 5 - 448,708,70 8 - 465,874,79 8 - 479,954,49 0 - 220,662,23 5 160,273,43 0 -86,810,329 180,593,42 9 -14,079,692 4,663,075,3 27 5,393,939,3 25 5,594,922,8 96 6,668,370,9 74 7,151,198,9 00 163,586 0 0 0 0 cost of good sale 4,663,238,9 13 5,393,939,3 25 5,594,922,8 96 6,668,370,9 74 7,151,198,9 00 Gross profit 1,553,641,0 41 2,069,987,1 92 2,504,871,9 16 2,139,111,1 43 1,571,680,9 14 Other operating income income from financial assests 22,402,525 19,863,717 21,407,860 27,869,276 69,528,324 income from other then financial assests 20,250,847 18,522,683 11,360,935 27,558,040 563,233,17 2 42,653,372 38,386,400 32,768,795 55,427,316 632,761,49 6 1,596,294,4 13 2,108,373,5 92 2,537,640,7 11 2,194,538,4 59 2,204,442,4 10 Distribution cost 123,094,46 0 127,286,61 7 173,756,32 8 199,674,65 0 230,737,92 4 Administrati on expenses 204,698,27 3 211,178,23 4 369,283,19 3 320,139,55 6 406,766,53 4 Depriciation 12,714,635 11,503,567. 00 30,406,685 29,643,610 29,929,070 depriciation on investment property 544,010 489,609 440,648 3,330,090 6,114,502 Total administratio n expense 217,956,91 8 223,171,41 0 400,130,52 6 353,114,07 5 442,810,10 6 Other operating expenses 40,079,316 69,353,698 93,310,486 93,353,444 82,637,992 Impairment 2,008,780 7,072,302 0 0 0
  44. 44. 44 loss on investment in associated company loss on disposal of property, plant & equipment 0 12,024,365 4,847,494 4,538,215 0 total operating expense 42,088,096 88,450,365 98,157,980 97,891,659 82,637,992 Finance cost long term financing 475,459,34 7 327,196,02 7 210,132,74 1 123,150,47 2 102,281,61 4 short term borrowing 226,360,91 4 348,422,67 8 272,543,26 7 278,730,12 9 228,928,64 7 Bank charge & commission 1,673,322 7,252,565 4,152,520 3,070,970 2,032,066 total financing cost 703,493,58 3 682,871,27 0 486,828,52 8 404,951,57 1 333,242,32 7 Share of loss/ (profit) of associates - net of tax -8,568,037 2,542,565 2,776,413 -6,906,716 2,571,094 1,078,065,0 20 1,124,322,2 27 1,161,649,7 75 1,048,725,2 39 1,091,999,4 43 Profit before taxation 518,229,39 3 984,051,36 5 1,375,990,9 36 1,145,813,2 20 1,112,442,9 67 Provision for taxation 90,238,072 295,569,41 8 338,867,64 0 284,639,08 6 126,011,65 3 Profit for the year 427,991,32 1 688,481,94 7 1,037,123,2 96 861,174,13 4 986,431,31 4 Sitara Chemical Industries Limited Income Statement As on june 30, 2011-2015 Rs(000) 2011 2012 2013 2014 2015 Sales - net 100 100 100 100 100 Cost of sales 75.0093125 1 72.2667795 9 69.0748719 7 75.7125689 9 81.9820867 9 Gross profit 24.99068749 27.73322041 30.92512803 24.28743101 18.01791321
  45. 45. 45 Other income 0.68608968 4 0.51429230 9 0.40456327 3 0.62932079 7.25404349 8 25.6767771 7 28.2475127 2 31.3296913 1 24.9167518 25.2719567 Distribution cost 1.98000381 1 1.70535731 7 2.14519419 4 2.26710253 1 2.64520352 1 Administrative expenses 3.50588912 1 2.99000009 6 4.94000817 7 4.00925111 5 5.07642103 8 Other operating expenses 0.64468537 7 0.92918516 6 1.15201049 1 1.05993339 3 0.94737052 2 Finance cost 11.3158624 3 9.14895488 9 6.01038099 5 4.59781315 3.82032464 2 Share of (profit) / loss of associates - net of tax - 0.137818923 0.034064711 0.034277572 - 0.078418734 0.029475289 17.58425966 14.80756218 14.28187143 12.01251892 12.51879501 Profit before taxation 8.335843652 13.18409771 16.98797276 13.00954353 12.75316169 Provision for taxation 1.451500957 3.959972239 4.183657091 3.231787272 1.444610675 Profit for the year 6.884342695 9.224125471 12.80431567 9.77775626 11.30855102

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