FSA Assignment, Financial Analysis Statement

1
Acknowledgement
I have the only pearl of my eyes to admire the blessing of the compassionate and
omnipotent because the words are bound, knowledge is limited and time is short to express his
dignity. All thanks are due only to Almighty ALLAH, most gracious, the most merciful, who
gave me the strength and I did this job. My special praises are for Holy Prophet Muhammad
(SAW) who is, for even humanity as a whole.
It is a matter of great honor and pleasure for me to express my ineffable gratitude and
profound indebtedness to my venerable Senior Teacher Mr. MALIK ABDUL KAREEM for his
kind support, valuable suggestions and sympathetic attitude throughout my analysis. I am much
impressed of his intellectual activities, inexhaustible energy to steer forth the student. His
sympathetic and sincerest attitude is highly qualified experience.
This financial report includes analysis of financial statements of D.G Khan Cement.
Special thanks to all those who have helped me in courage and motivation.
SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN
PREFACE
Getting practical knowledge is one of the major aims of MBA program. Institute of
Management Sciences, University of Balochistan, Quetta has followed policy of assigning
different practical assignments to its students so a touch of real working environment can be
given to the students apart from classroom studies at widen their perspective.
Analysis of Financial Statements is one of the core subjects of MBA major in finance,
which gives an insight into the theoretical concepts and their application in practical world.
Therefore study of the subject is imperfect without observing in real working environment.
In this context, respectable, instructor Mr. Malik Abdul Kareem has assigned us to study
and analyze the financial statements of D.G. Khan Cement Company Limited.
Executive Summary
Dera Ghazi Khan Cement Company Limited is a strategic business unit of Nishat Group,
which is the largest industrial group in Pakistan. D.G. Khan Cement Co. is market leader with
respect to market share with about 11.4% market share. Apart from its competitors; its product is
high priced yet it has highest market share because of good quality. Its plant is situated in Dera
Ghazi Khan and Khair-Pur and head office is situated at Lahore. Factory site Unit 1and 2 that is
situated in very remote area of Punjab, yet it proved a blessing for the company. Because it has
all three basic raw materials i.e. Lime stone, Shale, and Gypsum at one place. It has three plants
working two in D.G. khan and one in Khair-Pur. First plant is old one and it is Japanese plant.
The other two plants are of F.L.Smiths, Denmark. Presently it has a total Installed capacity of
14,000 tpd (tons per day).
Presently the company is also exporting the cement to Afghanistan, Iran, Iraq, UAE and
Russia. The team of the D.G. Cement is story of success of D.G. Cement. The whole team is
self-motivated and had played a vital role in the success of the company.
D.G. Khan Cement Company Limited

Mission Statement
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.
Vision Statement
To transform the Company into a modern and dynamic cement manufacturing company with
qualified professionals and fully equipped to play a meaningful role on sustainable basis in the
economy of Pakistan.
CORPORATE PROFILE
Board of Directors
1. Mrs. Naz Mansha Chairperson
2. Mian Raza Mansha Chief Executive
3. Mr. Khalid Qadeer Qureshi
4. Dr. Arif Bashir
5. Mr. Farid Noor Ali Fazal
6. Mr. Inayat Ullah Niazi Chief Financial Officer
7. Ms. Nabiha Shahnawaz Cheema
Audit
1.
2.
3.
Committee
Mr. Khalid Qadeer Qureshi Member/Chairman
Mr. Farid Noor Ali Fazal Member
Ms. Nabiha Shahnawaz Cheema Member
Human Resource
1. Mian Raza Mansha Member
Remuneration Committee
5
2. Mr. Khalid Qadeer Qureshi Member/Chairman
3. Ms. Nabiha Shahnawaz Cheema Member
Company Secretary
1. Mr. Khalid Mahmood Chohan
Bankers
Allied Bank Limited
Habib Bank Limited Limited
Askari Bank Limited
Habib Metropolitan Bank
Bank Alfalah Limited
MCB Bank Limited
Bank Islami Pakistan Limited
Meezan Bank Limited
Barclays Bank Plc
National Bank of Pakistan
Citibank N.A.
NIB Bank Limited
Deutsche Bank AG Samba Bank Limited
Dubai Islamic Bank
Standard Chartered Bank (Pakistan) Limited
Faysal Bank Limited
Silk Bank Limited
HSBC Bank
Middle East Limited
The Bank of Punjab
United Bank Limited
External Auditors
A.F. Ferguson & Co, Chartered Accountants
Cost Auditors
Avais Hyder Liaquat Nauman, Chartered Accountants
Legal Advisors
Mr. Shahid Hamid, Bar-at-Law
Registered Office
Nishat House, 53-A, Lawrence Road,
Lahore-Pakistan
Phone: 92-42-36367812-20 UAN: 111 11 33 33
Fax: 92-42-36367414
Email: info@dgcement.com
web site: www.dgcement.com
Factory 1. Khofli Sattai, Distt. Dera Ghazi Khan-Pakistan
Phone: 92-641-460025-7
Fax: 92-641-462392
Email: dgsite@dgcement.com
2. 12, K.M. Choa Saidan Shah Road,
Khairpur, Tehsil Kallar Kahar,
Distt. Chakwal-Pakistan
Phone: 92-543-650215-8
Fax: 92-543-650231
Domestic Cement Industry

The problems that beset Pakistan's cement industry last year seem to be continuing in 2012.
Increased competition from the
Middle East has badly affected the
country's export market. Pakistan's
cement industry's rated capacity is
44 million tons per annum and
industry's average operations during
FY12 was about 73% as compared
to 74% last year. Inflationary
pressures were immense in the
country. Out of the 73% utilization
74% was sold in domestic market
while 26% was exported. India,
Afghanistan, Sri Lanka, Iraq and
African continent countries are
among the major importer of
Pakistan cement.
Meeting of Board of Directors
During the year under consideration, six Board meetings were held and the number of meetings
attended by each Director is given in the annexed table.
AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of D.G. Khan Cement Company Limited as at June
30, 2012 and the related profit and loss account, statement of comprehensive income, statement
of changes in equity and cash flow statement together with the notes forming part thereof, for the
year then ended and we state that we have obtained all the information and explanations which,
to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the
responsibility of the companys management to establish and maintain a system of internal
control, and prepare and present the above said statements in conformity with the approved
accounting standards and the requirements of the Companies Ordinance, 1984. Our
responsibility is to express an opinion on these statements based on our audit. We conducted our
audit in accordance with the auditing standards as applicable in Pakistan. These standards require
that we plan and perform the audit to obtain reasonable assurance about whether the above said
statements are free of any material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the above said statements. An audit also
includes assessing the accounting policies and significant estimates made by management, as
well as, evaluating the overall presentation of the above said statements. We believe that our
audit provides a reasonable basis for our opinion and, after due verification, we report that:
a) in our opinion, proper books of account have been kept by the company as required by the
Companies Ordinance, 1984;
b) in our opinion:
i) the balance sheet and profit and loss account together with the notes thereon have been drawn
up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of
account and are further in accordance with accounting policies consistently applied except for
the changes resulted on initial application of standards, amendments or interpretations to existing
standards, as stated in note 2.2.1 to the annexed financial statements with which we concur;
ii) the expenditure incurred during the year was for the purpose of the companys business; and
iii) the business conducted, investments made and the expenditure incurred during the year were
in accordance with the objects of the company;
c) in our opinion and to the best of our information and according to the explanations given to us,
the balance sheet, profit and loss account, statement of comprehensive income, statement of
changes in equity and cash flow statement together with the notes forming part thereof conform
with approved accounting standards as applicable in Pakistan, and, give the information required
by the Companies Ordinance, 1984, in the manner so required and respectively give a true and
fair view of the state of the companys affairs as at June 30, 2012 and of the profit, total
comprehensive income, changes in equity and its cash flows for the year then ended; and
d) in our opinion no zakat was deductible at source under the Zakat and Ushr Ordinance, 1980
(XVIII of 1980).
The financial statements of the Company for the year ended June 30, 2011 were audited by
another firm of accountants, M/s KPMG Taseer Hadi & Company, Chartered Accountants,
whose report dated September 7, 2011 expressed an unqualified opinion thereon.
On
Deman
d
Export
5.2
million
tons/year
Dealer
s
Distributo
rs
BRANDS (PRODUCT)
Two different products are produced at DGKCC namely Ordinary Portland Cement and Sulphate
Resistant Cement. These products are marketed through two different
brands:
DG brand & Elephant brand Ordinary Portland Cement (It is

also called the OPC and its demand is about 92% because of
commonly used).
DG brand Sulphate Resistant Cement (It is
also called the SRC
and its demand is about only 8% because it is
only used in standing
the foundations its main work is to finish the
pours produced while
standing the foundations and made the
foundations
much
strong).
Remuneration of Chief Executive, Directors and Executives

The aggregate amount charged in the financial statements for the year for remuneration, including certain benefits,
to the Chief Executive, full time working Directors and Executives of the Company are as follows:
10
CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET
D.G Khan Cement Company Limited
Balance Sheet Statement
2012
In Rs.
(000)
2011
In Rs.
(000)
2010
2009
In Rs. (000)
In Rs. (000)
2008
In Rs.
(000)
Assets
Current Assets:
Cash and Bank balances
Advances, deposit and othe
Receivables
462,393
209,299
262,942
261,014
244,080
1,288,034
866,678
774,711
737,493
427,832
Investments
11,126,071
12,126,367
10,740,986
7,785,979
15,082,60
5
Trade Debts
486,597
650,283
462,367
656,986
463,446
Stocks in Trade
1,596,784
1,513,014
1,636,829
1,023,230
1,300,325
Stores, Spare laase tools
4,198,477
3,604,954
3,049,409
2,964,840
2,323,883
Total Current Assets
19,158,356
18,970,595
16,927,244
13,429,542
19,842,1
71
26,446,199
25,550,453
24,224,27
3
675
731
6,839
Non Current Assets:

Property Plant and Equipments
Assets Subjects to Finance Lease
28,073,573
25,707,179
11
Capitals work in progress
1,373,820
465,650
1,750,208
2,488,307
Intengible Assets
73,808
Investments
Long Term Loans, Advances and
deposits
4,661,316
5,055,787
4,493,293
2,968,879
6,592,332
138,748
134,125
159,583
167,959
524,176
Total Non Current Assets
32,947,445
32,270,911
31,565,400
30,438,230
33,835,9
27
Total Assets
52,105,801
51,241,506
48,492,644
43,867,772
53,678,0
98
1,446,235
1,450,074
569,329
391,610
EQUITY AND LIABILITIES

Current Liabilities:
Trade and other payables
2,231,863
Accrued markup
178,652
Short term borrowing - secured

Current portion of non-current
liabilities
7,559,348
9362051 10,080,232
9,446,856
8,194,330
2,245,561
2131566 2,369,438
4,924,181
2,828,202
Provision for taxation
35,090
35,090
35,090
16,421,691
12,899,3
06
Total Current liabilities
12,250,514
1847505 1,830,315
304800 376,277
35090 35,090
13,681,012
14,691,352
NON-CURRENT LIABILITIES
12
Long term finances

Liabilities against assets subject to
finance lease
4,649,083
Long term deposits
68,355
Retirement and other benefits
185,116
Deferred taxation
1,602,750
Total Non Current Liabilities
6,505,304
Total Liabilities
18,755,818
4960579 5,229,507
4,675,837
8,871,051
155
393
70893 81,138
73,765
73,890
139213 104,029
78,622
54,018
1,361,576
1,251,000
6,189,955
10,250,3
52
22,611,646
23,149,6
58
9,500,000
9,500,000
500,000
500,000
10,000,000
10,000,0
00
3,042,494
2,535,412
17,440,244
27,634,72
2
1730886 1,451,960
6,901,571
20,582,583
6,866,634
21,557,986
CAPITAL AND RESERVES

Authorised capital
950,000,000 (2009: 950,000,000)
ordinary shares of Rs. 10 each
9,500,000
50,000,000 (2009: 50,000,000)

preference shares of Rs. 10 each
500,000
10,000,000
Issued, subscribed and paid up

capital
Reserves
Accumulated profit
4,381,191
23,601,636
9500000 9,500,000
500000 500,000
10,000,000
10,000,000
4381192 3,650,993
24996406 22,199,501
939916
13
5,036,891
33,019,718
30,317,514
755,856
483,954
32,399
26,606,350
20,966,692
30,202,53
3
289,434
325,907
NON-CONTROLLING INTEREST
330,265
341409 328,308
Total Capital and Reserves
33,349,983
30,658,923
26,934,658
21,256,126
30,528,4
40
Total Equities and Liabilities
52,105,801
51,241,506
48,492,644
43,867,772
53,678,0
98
CONSOLIDATED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED JUNE 30th OF EACH YEAR.
Income Statement
2012
2011
2010
2009
In Rs. (000)
In Rs. (000)
In Rs. (000)
In Rs. (000)
2008
In Rs.
(000)
Sales - Net
23,846,341
19,451,360
16,973,236
18,368,507
12,464,347
Cost of sales
(16,236,017)
(14,797,866)
(13,928,614)
(12,563,681)
(10,528,04
6)
Gross profit
Expenses:
7,610,324
4,653,494
3,044,622
5,804,826
1,936,301
14
Administrative expenses
Selling and distribution
expenses
(273,884)
(216,927)
(176,497)
(145,547)
(110,745)
(2,218,815)
(2,484,622)
(1,005,271)
(1,881,101)
(562,970)
Other operating expenses
(520,101)
(50,303)
(204,791)
(823,692)
(595,687)
Other operating income
1,147,425
1,088,666
875,085
735,021
846,606
Impairment on investment
(118,836)
(257,386)
Profit from operations
5,744,949
2,871,472
2,533,148
3,432,121
1,513,505
Finance cost
(1,782,871)
(2,189,613)
(2,022,399)
(2,777,663)
(1,688,778
)
Profit before Taxation
3,962,078
681,859
510,749
654,458
(175,273)
Taxation
123,753
(484,698)
(199,973)
(239,376)
200,958
Profit after Taxation

Attributable to:
Equity holders of the
parent
Non - controlling
interest
4,085,831
197,161
310,776
415,082
25,685
4,096,975
184,060
271,902
451,555
30,022
(11,144)
13,101
38,874
(36,473)
(4,337)
Net Profit
4,085,831
197,161
310,776
415,082
25,685
Earnings per share-basic

and dilute
9.35
0.48
7.10
1.68
0.12
15
Vertical Analysis of Balance Sheet

Common Size Analysis ( Vertical )

2012
Change in
%
2011
Change in
%
2010
Change in
%
2009
Change in
%
2008
Change in
%
Current Assets:
Cash and Bank balances
Advances, deposit and othe Receivables
Investments
Trade Debts
Stocks in Trade
Stores, Spare laase tools
0.89%
2.47%
21.35%
0.93%
3.06%
8.06%
36.77%
0.41%
1.69%
23.67%
1.27%
2.95%
7.04%
37.02%
0.54%
1.60%
22.15%
0.95%
3.38%
6.29%
34.91%
0.60%
1.68%
17.75%
1.50%
2.33%
6.76%
30.61%
0.45%
0.80%
28.10%
0.86%
2.42%
4.33%
36.97%
Non Current Assets:

Property Plant and Equipments
Assets Subjects to Finance Lease
Capitals work in progress
Intengible Assets
Investments
Long Term Loans, Advances and deposits
53.88%
0.00%
0.00%
0.14%
8.95%
0.27%
50.17%
0.00%
2.68%
0.00%
9.87%
0.26%
54.54%
0.00%
0.96%
0.00%
9.27%
0.33%
58.24%
0.00%
3.99%
0.00%
6.77%
0.38%
45.13%
0.01%
4.64%
0.00%
12.28%
0.98%
Assets
16
Total Non Current Assets
Total Assets
EQUITY AND LIABILITIES
Trade and other payables
Accrued markup
Short term borrowing - secured
Current portion of non-current liabilities
Total Current liabilities
63.23%
62.98%
65.09%
69.39%
63.03%
100.00%
100.00%
100.00%
100.00%
100.00%
4.28%
0.34%
14.51%
4.31%
0.07%
23.51%
3.61%
0.59%
18.27%
4.16%
0.07%
26.70%
3.77%
0.78%
20.79%
4.89%
0.07%
30.30%
3.30%
1.30%
21.53%
11.23%
0.08%
37.43%
2.70%
0.73%
15.27%
5.27%
0.07%
24.03%
NON-CURRENT LIABILITIES
Long term finances
Liabilities against assets subject to finance
lease
Long term deposits
Retirement and other benefits
Deferred taxation
Total Non Current Liabilities
8.92%
9.68%
10.78%
10.66%
16.53%
0.13%
0.36%
3.08%
3.13%
12.48%
0.00%
0.14%
0.27%
3.38%
13.47%
0.00%
0.17%
0.21%
2.99%
14.16%
0.00%
0.17%
0.18%
3.10%
14.11%
0.00%
0.14%
0.10%
2.33%
19.10%
Total Liabilities
36.00%
40.17%
44.46%
51.55%
43.13%
8.41%
45.30%
8.55%
48.78%
7.53%
45.78%
6.94%
39.76%
4.72%
51.48%
CAPITAL AND RESERVES

Authorised capital
950,000,000 (2009: 950,000,000) ordinary
shares of Rs. 10 each
50,000,000 (2009: 50,000,000) preference
Issued, subscribed and paid up capital
Reserves
17
Accumulated profit
NON-CONTROLLING INTEREST
Total Capital and Reserves
Total Equities and Liabilities
9.67%
63.37%
1.83%
59.17%
1.56%
54.87%
1.10%
47.80%
0.06%
56.27%
0.63%
64.00%
0.67%
59.83%
0.68%
55.54%
0.66%
48.45%
0.61%
56.87%
100.00%
100.00%
100.00%
100.00%
100.00%
Analysis:
Current Assets of the company are not moving in same trend it is fluctuating (ups and downs). Cash and bank balance
has improved in FY-2012. Non-current assets are almost the same where as property, plant and equipment was decreased in FY-2011
but later years it has improved. Investments, long term loans and deposits are fluctuating during the years. Assets subject to finance
lease is decreasing. Total current liabilities have decreased substantially in current year. Short term borrowing has decreasing trend
during the years. Where as the non-current liabilities have been decreasing during the years. Reserves have also decreased during the
FY-2012 which results in lower equity.
Common Size
Analysis ( Horizontal
)

2012
Chan
ge in Chang
%
e in $
2011
Cha
nge
Chang
in %
e in $
2010
Cha
nge
Chang
in %
e in $
2009
Cha
nge
in %
Assets
Current Assets:
Change
in $
200
8
Cha
nge
in %
18
Cash and Bank

balances
Advances, deposit and
othe Receivables
301% 421,356
(53,643
9% )
203
% 91,967
11% 1,928
181
% 37,218
11% 16,934
172
% 309,661
100
%
100
%
Investments
(1,000,
74% 296)
1,385,3
80% 81
2,955,0
71% 07
(7,296,6
52% 26)
100
%
Trade Debts
(163,68
105% 6)
Stocks in Trade
Stores, Spare laase
tools
189% 253,094
123% 83,770
181% 593,523
187,76
97% 1
140
% 187,916
(194,61
3% 9)
4% 193,540
100
%
116 (123,81
% 5)
155
% 555,545
126
% 613,599
131
% 84,569
(277,095
79% )
128
% 640,957
100
%
100
%
(6,412,
68% 629)
100
%
2,043,
96% 351
3,497,
85% 702
Non Current Assets:

Property Plant and
Equipments
Assets Subjects to
Finance Lease
2,366,3
116% 94
0% -
Capitals work in
progress
Intengible Assets
Investments
Long Term Loans,
(1,373,
0% 820)
-
73,808
(394,47
71% 1)
26%
106 (739,02
% 0)
0% (675)
55% 908,170
0% 77% 562,494
26%
109
% 895,746
105 1,326,18
% 0
10% (56)
11% (6,108)
(1,284,
19% 558)
(738,099
70% )
0% 1,524,4
68% 14
30%
0% (3,623,4
45% 53)
32%
100
%
100
%
100
%
100
%
100
%
100
19
(25,458
)
(8,376)
676,53
97% 4
705,51
95% 1
1,127,
93% 170
864,29
97% 5
2,748,
95% 862
4,624,
90% 872
154% 384,358
127
% 17,190
Accrued markup
(126,14
46% 8)
Short term borrowing secured
(1,802,
92% 703)
Current portion of noncurrent liabilities
79% 113,995
Advances and deposits

Total Non Current
Assets
Total Assets
EQUITY AND
LIABILITIES
Trade and other
payables
4,623
100% -
(356,217
)
(3,397,
90% 697)
100
%
(9,810,
82% 326)
100
%
126
% 384,080
100
% (3,839)
100
%
(71,477
78% )
(193,05
96% 2)
145
% 177,719
100
%
114 (718,18
% 1)
123
% 633,376
115 1,252,52
% 6
100
%
(237,87
75% 2)
100
% -
(2,554,
84% 743)
100
% -
174 2,095,97
% 9
100
% -
100
%
100
%
Total Current
liabilities
(1,430,
95% 498)
106 (1,010,
% 340)
114 (1,730,
% 339)
127 3,522,3
% 85
100
%
NON-CURRENT
LIABILITIES
Long term finances
52%
56%
59%
53%
100
20
(311,49
6)
Liabilities against
assets subject to
finance lease
Long term deposits
Retirement and other
benefits
Deferred taxation
Total Non-Current
Liabilities
Total Liabilities
0% -
(268,92
8)
0% -
(4,195,2
14)
553,670
0% (155)
39% (238)
%
100
%
343% 45,903
(10,245
96% )
258
% 35,184
110
% 7,373
193
% 25,407
100
% (125)
146
% 24,604
100
%
100
%
(128,13
128% 6)
138
% 278,926
116
% 90,384
109
% 110,576
100
%
(396,2
63% 67)
67% 34,937
676,67
67% 9
(4,060,
60% 397)
100
%
(1,826,
81% 765)
(975,4
89% 03)
(1,053,
93% 660)
(538,01
98% 2)
100
%
93% (2,538)
CAPITAL AND
RESERVES
Authorised capital
950,000,000 (2009:
950,000,000) ordinary
50,000,000 (2009:
50,000,000)
preference shares of
Rs. 10 each
Issued, subscribed and
173%
173
144
120
100
21
paid up capital
Reserves
Accumulated profit
NON-CONTROLLING
INTEREST
Total Capital and
Reserves
Total Equities and

Liabilities
(1)
(1,394,
85% 770)
% 730,199
% 608,499
2,796,9
90% 05
4,759,2
80% 57
2901
% 184,060
2333
% 271,902
2,702,2
109% 04
100 3,711,1
% 64
5,639,6
88% 58
(11,144
101% )
105
% 13,101
109 2,691,
% 060
1554
6%
4,096,9
75
% 507,082
(10,194,
63% 478)
100
%
###
#
451,555
100
%
(9,235,8
69% 41)
100
%
101
% 38,874
89% (36,473)
100
%
100 3,724,
% 265
5,678,
88% 532
(9,272,
70% 314)
100
%
864,29
97% 5
2,748,
95% 862
4,624,
90% 872
(9,810,
82% 326)
100
%
Analysis:
In horizontal analysis, stock in trade, advances, deposits, prepayments and other receivables, total
current assets, property, plant and equipment, total non-current assets and total assets, short term
borrowing, maturity of portion of non-current liabilities, total current liabilities, total equity and liabilities
have been shown the positive trend during the years. Where as trade debts, investments, cash and bank
balance, capital work in progress, long term loans and deposits, long term finances, long term deposits,
reserves have shown the fluctuating results.
22
Common Size Analysis ( Vertical )

Income Statement
Sales - Net
Cost of sales
Gross profit
Expenses:
Administrative expenses
Selling and distribution expenses
Other operating expenses
Other operating income
Impairment on investment
Profit from operations
Finance cost
Profit before Taxation
Taxation
Profit after Taxation
Attributable to:
Equity holders of the parent
Non - controlling interest
Net Profit
2012
Change
in %
100.00%
68.09%
31.91%
2011
Change
in %
100.00%
76.08%
23.92%
2010
Change
in %
100.00%
82.06%
17.94%
2009
Change
in %
100.00%
68.40%
31.60%
2008
Change
in %
100.00%
84.47%
15.53%
1.15%
9.30%
2.18%
4.81%
0.00%
24.09%
7.48%
16.62%
0.52%
17.13%
1.12%
12.77%
0.26%
5.60%
0.61%
14.76%
11.26%
3.51%
2.49%
1.01%
1.04%
5.92%
1.21%
5.16%
0.00%
14.92%
11.92%
3.01%
1.18%
1.83%
0.79%
10.24%
4.48%
4.00%
1.40%
18.68%
15.12%
3.56%
1.30%
2.26%
0.89%
4.52%
4.78%
6.79%
0.00%
12.14%
13.55%
1.41%
1.61%
0.21%
17.18%
0.05%
17%
0.95%
0.07%
1.01%
1.60%
0.23%
1.83%
2.46%
0.20%
2.26%
0.24%
0.03%
0.21%
Analysis:
Cost of goods sold is very much increased in the FY-2008 and 2010. Which is resulting lower profit
margin. Interest has also increased and selling and distribution expenses and other operating expenses
have increased substantially. These all result in least operating profit. Financial cost has been also
decreased as a result net profit boost up during FY-2012.
23
Analysis:
Cost of goods sold is very much increased in the FY-2008 and it is continuously increasing since FY2012 which is resulting lower profit margin. Selling and distribution expenses and other operating
expenses have increased substantially. In FY-2009 and 2011 the taxes are high compare to other Financial
Years.
24
25
Financial Performance Year by Year

Change of following in $
Particulars
Sales
2012-2011
In Rs. (000)
4,394,981
2011-2010
In Rs. (000)
2,478,124
2010-2009
In Rs. (000)
(1,395,271)
2009-2008
In Rs. (000)
2008-2007
In Rs. (000)
5,904,160
12,464,347
Cost of Sales
(1,438,151)
(869,252)
(1,364,933)
(2,035,635)
(10,528,046
)
Gross Profit
Profit from
operations
2,956,830
1,608,872
(2,760,204)
3,868,525
1,936,301
2,873,477
338,324
(898,973)
1,918,616
1,513,505
Finance Cost
Profit befor
taxation
406,742
(167,214)
755,264
(1,088,885)
(1,688,778)
3,280,219
171,110
(143,709)
829,731
(175,273)
Taxation
Profit after
Taxation
608,451
(284,725)
39,403
(440,334)
200,958
3,888,670
(113,615)
(104,306)
389,397
25,685
Issued, subscribed and paid up capital
26
27
Financial Ratio Analysis
Introduction:
Financial statements are prepared primarily for decision making. They play a dominant role in
setting the frame work of managerial decisions. But information provided in the financial
statements is not analysis end in itself as no meaning full conclusions can be drawn from these
statements alone. However, the information provided in the financial statements is of the
immense use in making decisions through analysis and interpretation of financial statements.
Financial ratio analysis is the process of identifying of financial strength and the weakness of the
firm by properly establishing a relationship between the items of the balance sheet and the profit
and loss account. There are various methods used in analyzing financial statements such as
comparative statements, schedules of changes in working capital, common size percentages,
funds analysis and the ratio analysis. The ratio analysis is the most powerful tool of financial
analysis.
I performed the ratio analysis of D.G Cement Co, Limited which is a listed company.
ANALYSIS OF ACCOUNTING RATIOS:

Now we shall analyze some important factors like liquidity, profitability, long term solvency and
activities of firm with the help of ratios which are usually brought under observation by the
creditors, investors, management and other stake holders.
1. Liquidity Ratios
2. Leverage Ratios
3. Profitability Ratios
Liquidity Ratios:
These are the most important ratios from the lenders point of view. These are the ratios which
measure the short term solvency or financial position of firm. These ratios are calculated to
28
comment upon the short-term paying capacity of a concern or a firms ability to meet its current
obligations.
The various liquidity ratios are current ratio, liquid ratio (Acid Test Ratio) and
absolute liquid ratio.
Current Ratio:
Current ratio measures general liquidity and is widely used to make the analysis for a short term
financial position or liquidity of a firm. Current ratio is basically a relationship between current
assets and current liabilities.
Current Assets
Current Liabilitie s
Current Ratio
Years
Current Ratio
FY 2012
FY 2011
FY 2010
FY 2009
FY 2008
1.56
1.38
1.15
0.81
1.53
Interpretation:
The current ratio of D.G. Khan Cement Company Limited up to 2012 shows that it has the
ability to meet all its obligations in respect of financial debts. But the ratio up to 2010 is the
indication that the enterprise has been in good liquid position since last one year. It is an
attractive sign for the stakeholders to keep full confidence in the operations and policies of the
enterprise. The company can avail easily short term borrowing facility from banks and financial
institutions with more reliably than the previous year as its current position is better than the
previous year.
Liquid Ratio (Acid Test Ratio):

This ratio shows better liquidity than the current ratio as it is a relationship between liquid assets
and current liabilities. Liquid assets include all current assets except prepayments and stock
because prepayments usually are not converted into cash and stock takes much time to be
converted into cash.
CurrentAssets Inventory
Current Liabilitie s
Acid Test Ratio
29
Years
Acid-Test
Ratio
FY 2012
FY 2011
FY 2010
FY 2009
FY 2008
0.273
0.189
0.182
0.123
0.153
Interpretation:
The liquid ratio of D.G. Khan Cement Company Limited. is showing its better liquidity position
and its liquid ratio is better than the requirement that is usually observed by the banks and other
financial institutions . D.G. Khan Cement Company Limited 2012 year ratio is .273 that is good
sign for the company and provisos year 2011 ratio is 0.189 The stake holders especially creditors
can rely on the company because D.G. Khan Cement Company Limited. has liquid assets to pay
the short term liabilities in time or when they will become due. The liquidity of the enterprise has
been increased from the last year which is an indication of the better business operations and
policies.
Analysis of Profitability: (profitability Ratios)
Profit earning is considered essential for the survival of the business and it is primary motive of
any business. A business needs profit not only for its existence but also for expansion and
diversification. The investors want adequate return on their investments creditors want higher
security for their interest and loan and so on. A business enterprise can discharge its obligations
to the various segments of the society only thorough earning profits. Profit is a useful measure of
overall efficiency of a business. Profitability ratios are measured by the investors and share
holders to assess the management in order to assess how efficiently the business operations are
being carried out. Profitability is the main base for liquidity as well solvency. Creditors, bankers
and financial institutions are interested in profitability ratios since they indicate liquidity of the
business to meet interest obligations and regular improved profits to enhance the long term
solvency of the business. Owners are interested in profitability to indicate the growth and also
the rate of return on their investments. Generally profitability ratios are calculated with respect to
sales and with respect to investments.
Following ratios are calculated with respect to sales.
Gross Profit Ratio (Gross Profit Margin):
30
Gross Profit ratio is a ratio of Gross Profit to Net Sales expressed as percentage. It expresses the
relationship directly between gross profit and sales and indirectly between cost of goods sold and
sales.
Gross Pr ofit
100
Net Sales
Gross Profit Ratio =

Years
Gross Profit
Margin
FY 2012
FY 2011
FY 2010
FY 2009
FY 2008
32.71%
23.63%
17.15%
31.60%
15.52%
Interpretation:
The gross profit percentage of D.G Khan Cement Company limited. has been increased from
year 2010 ratio is 17.15% and 2010 ratio is 23.6.56% and in 2012 it is 32.7%. We can say that
enjoy the monopoly in the market. Management should assess that why their cost has been
increased. However this GP Margin is still up to the mark GP margin can be made by increasing
sales, by decreasing cost and adopting better purchase policies.
Net Profit Ratio:
This is the ratio of net profit (before tax) to net sales expresses as percentage:
Net Pr ofit aftereTaxation
100
Net Sales
Net Profit Ratio
Years
Net Profit
Margin
FY 2012
FY 2011
FY 2010
FY 2009
FY 2008
17.90%
10.00%
1.80%
2.61%
0.43%
Interpretation:
Net profit ratio of the D.G Khan Cement Company Limited is increased from year 2008 which
ratio is 0.45% , year 2009 ratio is 2.61%, year 2010 ratio is 1.80%, year 2011 ratio is 10.00% and
year 2012 ratio is 17.90%. There is good sign for the company How ever the expenses incurred
in the running of the business are also increase but at a faster rate then profit. Which shows the
company is in a strong position.
31
Profitability Ratios with respect to Investment:

Following ratios are important to find out the profitability of a company with respect to
investment. As investors demand adequate returns to their investments so with the help of these
ratios they can realize and analyze about the security and returns of their investments.
Earnings per Share:
Earnings per share is a small variation of return on equity capital and it is calculated by net profit
after tax and preference dividend dived by the total number of equity shares. It determines the
per share earnings in Rupees.
Earning After Tax
No.Of Ordinary Shares
Earnings per Share
Years
EPS
FY 2012
9.35
FY 2011
0.48
FY 2010
7.10
FY 2009
1.68
FY 2008
(0.21)
Interpretation:
Earnings per share of D.G Khan Cement Company Limited is relative increased from the
previous years and is satisfactory for the share holders with respect to their return on the shares
purchased by them. As this ratio describes the rate of dividend so it can be assumed company is
distributing high dividends. This year ration is 9.35 share that is good sign for the company and
2011 year ratio is 0.48 which is a bad sign for share holders.
Inventory Turnover Ratio:
Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet
the requirements of the business. But the level of inventory should neither be too high nor too
low. A too high inventory means higher carrying costs and higher risk of stocks becoming
obsolete whereas too low inventory may mean the loss of business opportunities. Thus, it is very
essential to keep sufficient stocks in business.
Inventory turnover ratio, also known as stock turnover, is the relationship between the cost of
goods sold during a particular period of time and the cost of average inventory during that
period. It is expressed in number of times.
32
Cost Of Goods Sold

Avg . Clo sin g Stock
Inventory Turnover Ratio =
Years
Inventory Turnover
FY 2012
FY 2011
FY 2010
FY 2009
FY 2008
5.22
4.69
10.47
10.81
8.09
Interpretation:
D.G. Khan Cement Company Ltd. stock turn over ration company show this year ratio 2012 is
5.22 poor sign for the company and generally a low inventory ratio means that company is not
efficiently managing and selling its inventory and doesnt control the sound sale policies, trading
in quality poor reputation in the market. The year 2011 ratio is 4.69 is poor but the company
2010 year is good increased the ratio is 10.47.
Average Collection Period Ratio:
The debtors/Receivables Turnover Ratio when calculated in terms of days known as average
collection period or debtors collection period ratio. The average collection period ratio
represents the average number of days for which a firm has to wait before its debtors are
converted into cash. It can be calculated as follows:
No. of Days (Accounts Receivable Turnover Turnover Ratio) =

Years
Accounts
Receivable
Turnover
Avg.Trade Debtors
CreditSales
FY 2012
FY 2011
FY 2010
FY 2009
12.53
15.36
17.61
16.27
365
FY 2008
23.98
Interpretation:
D.G Khan Cement Company Ltd. is working on relatively better debtor turnover ratio and
average debtors collection period showing that debtors are more liquid and company is much
efficient in the management of its debtors. The year 2012 ratio is 12.53 days that is very
excellent debtor collection period as compare 2011 year ratio is 15.36 days .The D.G Cement
company is much efficiently and effectively to complete the bill receivable for the client.
33
Leverage Ratios
This Debt/Worth or Leverage Ratio indicates the extent to which the business is reliant on debt
financing (creditor money versus owner's equity): Generally, the higher this ratio, the more risky
a creditor will perceive its exposure in your business, making it correspondingly harder to obtain
credit.
Debt Equity Ratio
Stock holder's funds include equity share capital plus all reserves and surpluses items. Total
assets include all assets, including Goodwill. Some authors exclude goodwill from total assets. In
that case the total shareholder's funds are to be divided by total tangible assets. As the total assets
are always equal to total liabilities.
Total Liabilities
Debt Equity Ratio = Shar e' sholder Equity
Years
Debt/Equity
Ratio
FY 2012
FY 2011
FY 2010
FY 2009
FY 2008
0.562
0.67
0.80
1.06
0.758
Interpretation:
The equity ratio of D.G Khan Cement Company Ltd. This is not good sign for the company
because the profit of the company is the owner and share holder. The 2012 year ratio is 0.56 of
the investor share in this company and only 44% share is the owner of the D.G Khan Cement as
compare to 2011 year ratio is 67% of the investor in this company and only 33% share is the
owner of the company is also decrease for the year 2011 ratio is very bad condition for the
company owner.

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1

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

D.G. Khan Cement Company Limited

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

Domestic Cement Industry

AUDITORS' REPORT TO THE MEMBERS

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

DG brand & Elephant brand Ordinary Portland Cement (It is

DG brand Sulphate Resistant Cement (It is

also called the SRC

and its demand is about only 8% because it is

only used in standing

the foundations its main work is to finish the

pours produced while

standing the foundations and made the

Remuneration of Chief Executive, Directors and Executives

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

CONSOLIDATED FINANCIAL STATEMENTS

Stores, Spare laase tools

Total Current Assets

Non Current Assets:

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

Capitals work in progress

Total Non Current Assets

EQUITY AND LIABILITIES

Short term borrowing - secured

Provision for taxation

Total Current liabilities

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

Long term finances

Long term deposits

Retirement and other benefits

Total Non Current Liabilities

CAPITAL AND RESERVES

50,000,000 (2009: 50,000,000)

Issued, subscribed and paid up

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

Total Capital and Reserves

Total Equities and Liabilities

CONSOLIDATED PROFIT AND LOSS ACCOUNT

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

Other operating expenses

Other operating income

Profit from operations

Profit before Taxation

Profit after Taxation

Earnings per share-basic

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

Vertical Analysis of Balance Sheet

D.G Khan Cement Company Limited

Non Current Assets:

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

CAPITAL AND RESERVES

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

D.G Khan Cement Company Limited

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN

Cash and Bank

Total Current Assets

Non Current Assets:

SUBMITTED BY: IFTIKHAR AHMED SANJRANI (M-19), UNIVERSITY OF BALOCHISTAN