MID & FINAL PROJECT

SUBMITTED BY
STUDENT NAME

ROLL NUMBER

ABDUL REHMAN

13262

SUBMITTED TO
SIR SALMAN
TOPIC
FINANCIAL RATIOS DEFINATIONS (MID
PHASE)
&
CROSS SECTIONAL ANALYSIS BETWEEN
FAUJI FERTLIZER &
ENGRO FERTLIZER (FINAL PHASE)

SUBMISSION DATE
30/DECEMBER /2015

ACKNOWLEDGEMENT
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First of all I am grateful to Almighty Allah

who

in spite of all my weaknesses enabled me to complete this

project.
I am also indebted to my teacher SIR SALMAN for his kind
of guidance and supervision. Under their direction I get the
opportunity to polish my concealed qualities and skill
moreover, his timely help paved a way for me to complete
this work. It was surely their method of teaching & eagerness
for imparting knowledge that I did not find much difficulty to
give in to my thoughts and information. He motivated us to
work hard and to achieve high-level performance. The
development of this project has enabled me to better
comprehend the contents of financial analysis. I feel highly
privilege to ascribe the most and ever burning flame of my
gratitude and deep scene of devotion to MR SALMAN who
taught us FINANCIAL STATEMENT ANALYSIS with heart
and also gave several guidelines regarding accomplishment
of this project. Further

on,

am

my

parents

it is the result of their

prayers

grateful

to

that I am succeeded for what I have done today.

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I dedicate
this project to my highly regarded teacher

Mr. Salman Masood

who

provided me all guidelines to prove myself. I am grateful to him for giving me

this opportunity to explore new dimensions which will help me in a long run. He
guided us and taught us with different techniques, which enabled us to
complete this project, as well as for unconventional style of teaching and
maintaining very open and competitive atmosphere within the class, which
made the subject very interesting for me the most important thing is that the
knowledge which we have studied in our subject was all that same which we
have observed practically.

May god bless you Ameen ! !

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Midterm portion
Liquidity
i.

Days sales in receivables

It is the ratio of gross receivables to net sales/365 also known as the number of days of
receivables it tells number of days it will take to collect an account receivable against your
sale. Its formula is:

Gross receivables
Net sales/365

ii.

Days sales in inventory

It is the ratio of inventory to CGS/365 this ratio basically measures average time required a
company to transform its inventory into sales. Its formula is:

Ending inventory
CGS /365

iii.

Account receivable turnover

Account receivable turnover is a company's annual sales divided by the company's average
gross balance in its Accounts Receivable account generally is a ratio which tells that number
of times a business collects its average receivables. Its formula is:

Net sales
Average Gross Receivables

iv.

Inventory turnover

It is the ratio of cost of goods sold to average inventory in simple sense a ratio which
calculates number of times a business sells off its entire inventory in a year. Its formula is:

CGS
Average Inventory

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v.

Account receivable turnover in days

It is the ratio of average gross receivables to net sales/365 moreover this ratio specifies the
liquidity of the company's receivables in days. Its formula is:

Average Gross Receivables

Net Sales /365

vi.

Inventory turnover in days

It is the ratio of average inventory to cost of goods sold/365 generally this ratio specifies the
liquidity of the companys inventory in days. Its formula is:

Average inventory
CGS /365

vii.

Operating cycle

This ratio is the sum of accounts receivables turnover in days and inventory turnover in days
mostly operating cycle is less than one year this ratio tells the difference of times between
the acquisition of inventory and recognition of cash from sales of inventory. Its formula is:
=
viii.

( Accounts receivable turnover days ) +(Inventory turnove r days)

Working capital

It is the difference of current assets of the company with current liabilities it compares
current assets to current liabilities. Its formula is:
= Current assets - current liabilities

ix.

Sales to working capital

It is the ratio of net sales to average working capital this ratio indicates the firm's ability to
finance additional sales without incurring additional debt. Its formula is:

Net sales
Average Working Capital

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x.

Cash ratio

It is the ratio of cash and its equivalent to total current liabilities moreover this is a ratio
which determines a companys ability to pay off its current obligations with only cash and its
equivalent. Its formula is

Cash+Cash equivalent+ Marketable Securities

Total current liabilities

xi.

Current ratio

It is a ratio of total current assets to total current liabilities it is an important ratio which
calculates a companys ability to pay off its short term liabilities. Its formula is:

Total current assets

Total current libilities

xii.

Acid test ratio

Acid test ratio is also known as quick ratio it is the ratio of total current assets exclude
inventory to total current liabilities it compares the cash plus cash equivalents and accounts
receivable to the current liabilities. Its formula is:

Total current assetsinventories

Total current libilities

Long term debt paying ability ratio

i.

Time interest earned ratio

It is the ratio of operating profit to interest amount in black and white following ratio
specifies company capacity to meet its interest payments. Its formula is:
Recurring earnings , excluding interest expense , tax expense ,equity earnings
including non contorlling interest

Interest expense including capitilized interest

ii.

Fixed charge coverage ratio

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It is the ratio of operating profit plus interest portion of rental to

interest

amount and interest portion of rental in a clear sense following ratio measures a firm ability
to pay all of its fixed charges or lease amounts from its operating profit. Its formula is:
Recurring earnings , excluding interest expense , tax expense ,equity earnings
including non contorlling interest +interest portion of rental

Interest expense including capitilized interest +interest portion of rental

iii.

Debt ratio

It is the ratio of total liabilities to total assets of the company moreover a ratio which
calculate a firm portion of liabilities in compare with total assets. Its formula is:

Total libilities
Total assets

iv.

Debt equity ratio

It is the ratio of total liabilities to total equity moreover, this ratio calculate a firm total
liabilities in compare to its equity in order to finance companys assets. Its formula is:

Total libilities
Total equities

v.

Debt to tangible net worth ratio

It is the ratio of total liabilities to total equity minus intangibles generally a kind of ratio
which shows proportion of equity and debt the company is using to finance its tangible
assets. Its formula is:

Total libilities
Total equityintangibles

Profitability ratios
i.

Net profit margin ratio

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Its the ratio of net profit to net sales generally a ratio which
calculate amount of net income earned by a company by using each dollar of sales. Its
formula is:

Net income before non recurringitemsn on controlling interest

net sales

ii.

Gross profit margin ratio

It is the ratio of gross profit to net sales and a kind of ratio which tells gross profit as a
proportion of sales after subtracting cost of goods sold expense. Its formula is:

Gross profit
Net sales

iii.

Operating income margin

It is the ratio of operating income to net sales in a clear sense a ratio which shows operating
income generated by each dollar of sales. Its formula is:

Operatin g income
net sales

iv.

Total asset turnover

It is the ratio of net sales to avera ge total assets it tells how efficiently a firm used its assets in
order to produce sales. Its formula is:

Net sales
Average total asse ts

v.

Operating asset turnover

It is the ratio of net sales to average operating assets this ratio indicates the proportion of
operating assets in order to generate net sales. Its formula is:

Net sales
Average operating assets

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vi.

Sales to fixed asset

It is the ratio of net sales to average fixed assets following ratio calculate ability of a firm to
produce net sales by using its fixed assets. Its formula is:
Average
Net sales

assets

vii.

Return on assets

Its the ratio of net income after tax to average total assets it tells how efficiently a company
is using its assets in order to produce its earning. Its formula is:

Net income before non recurringitemsnon controlling interest

Average total assets

viii.

Return on total equity

It is the ratio of net income to average total equity following ratio calculates the income a firm
earned by using its shareholders investment. Its formula is:

Net income before non recurringitemsnon controlling interest dividend

on redeemable preferred stock

Average total equity

ix.

Return on common equity

It is the ration of net income to average total common equity this ratio calculate net income
a company produce by using its common shareholder investment in company. Its formula is:

Net income before non recurringitemsnon controlling interest preferred dividend

Average total common equity

x.

Return on investment

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It is the ratio of net income to average total investment
generally this ratio specifies amount of net income a company generates by using its total
investment. Its formula is:
Net income before non recurringitemsnon controlling interest
+ erest expense( 1tax )

Average(long term liabilities+ total equity )

xi.

Earnings per share

It is the ratio of net income after preferred dividend to number of common shares this ratio
indicates how many dollars of net income have been earned by each share of common stock.
Its formula is:

Net income preferred dividend

Number of shares outstanding

xii.

Dividend payout ratio

It is the ratio of dividend per common share to earnings per share this ratio indicates
percentages of earnings given to share holders in dividends. Its formula is:

Dividend per common share

Earnings per share

xiii.

Dividend yield

It is the ratio of dividend per common share to market value of share this ratio indicates
amount of dividend given to shareholders relative to market value per share. Its formula is:

Dividend per common share

Market price per common share

xiv.

P/E ratio

P/E ratio is the one of the most powerful tool to look how highly value a company stock is its
the ratio of market price per common share relative to its earnings per share. Its formula is:
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Market price of common share

Earnings per share

xv.

% of retained earnings ratio

It is the ratio of net earnings after all dividend to net income this ratio specifies percentage
of net earnings not paid out as dividend and retained by company. Its formula is:

Net income all dividends

Net income

xvi.

Book value per share ratio

It is the ratio of total stock holders equity after preferred stock to total number of shares
outstanding this ratio compares the amount of stockholders' equity to the number of shares
outstanding. Its formula is:

Total stockholders equity preferred stock

Totalnumber of shares outstanding

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SLELECTED COMPANIES

FAUJI
FERTLIZE
R

ENGRO
FERTLIZER

INDUSTRIAL SECTOR
FERTLIZ
ER

Current industrial statistic

Major Fertilizers industries of Pakistan produced different kind of fertilizers with ranking of
Engro Pakistan 33% Urea Production share Fauji Fertilizers (Goth Machi) 38% Fauji Fertilizers
(Bin Qasim) 7% Engro Fatima Pak 6% Arab (Multan) 8% Agri Tech (Mianwali) 7% Dawood
Hercules (Skp) 6% Only FF produces DAP.
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ABOUT FAUJI FERTILIZER
Fauji Fertilizer Company Limited (FFC) is the

largest

chemical fertilizer producer of Pakistan with

biggest

market share in the country. Fauji Fertilizer

Company

Limited (FFC), the largest urea manufacturer

in

the

country, was incorporated on May 08, 1978 as a joint venture between Fauji Foundation,
Pakistan and M/s Haldor Topsoe A/S of Denmark. It was established to fill the projected gap in
demand and indigenous production. Company shares are held by Fauji Foundation (43%) and
various investment companies, financial institutions and individuals. The Company was listed
on Karachi and Lahore Stock Exchanges in 1991 and on Islamabad Stock Exchange in 1992.
Company employees were also allotted shares for motivation and promoting a sense of
participation. Based on related criteria of Karachi Stock Exchange, primarily quantum of
dividend payout, FFC has been placed in the list of top 25 companies of Pakistan
consecutively for seven years since 1994, topping the list in 1997. Fauji Fertilizer Company
Ltd. remains committed to continue to play its role in the development of agriculture in
Pakistan by not only supplying high quality fertilizers but also technical services to the
farmers in the years to come for improving agricultural productivity and increasing their
income.

Vision
To be a leading national enterprise with global aspirations, effectively pursuing multiple
growth opportunities, maximizing returns to the stakeholders, remaining socially and
ethically responsible.

Core values

HONESTY

EXCELLENC
E

FAIRNESS

CONSISTEN
CY

Associated companies
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FFC
ENERGY
LIMITED

ASKARI
BANK
LIMITED

FAUJI
FRESH &
FREEZE
LIMITED

FAUJI
FERTLIZE
R BIN
QASIM
LIMITED

Competitors

Sunland
Crops
Sunland Crops
care
care

Engro
fertlizer
Engro fertlizer

Karshima
Karshima
Fertlizer
Fertlizer

Prime
Agro
Prime Agro
Chemical
Chemical &
&
Fertlizers
Fertlizers

Products

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DAP
SULPHIAT
E OF
POTASH
SONA
BORON

ABOUT ENGRO FERTLIZER

Engro Fertilizers Limited was incorporated in June 2009,
following a decision to demerge fertilizer concern from its

parent

company Engro Chemical Pakistan Limited to a newly

formed

Engro subsidiary Engro Fertilizers Limited. Engro Fertilizers Limited is a subsidiary of Engro
Corporation and a well-known name in Pakistans fertilizer industry. It is traded on the stock
market under the symbol EFERT. Engro holds a vast, nationwide production of fertilizer.
Engro is also a leading importer and seller of Phosphate products, which are marketed widely
across Pakistan as phospatic fertilizers. The shares of the company are listed on Karachi
stock exchange (Guarantee) Limited and Lahore Stock Exchange (Guarantee) Limited.

In

2013, the Company entered into the capital markets and raises the necessary capital
required to fund development capex on securing additional gas supplies. The IPO was a
roaring success being oversubscribed four times in the book building process whilst being
oversubscribed for three times at the time of public issue.

Slogan
Together we will change the world

Vision
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To be the premier Pakistani enterprise with a global reach
pursuing value creation for all stakeholders

Core values
Commitmen
t

Appreciati
on

Innovation

Quality

Leadership

Subsidiaries
Engro Foods
Limited
Elengy Terminal
Pakistan
Limited

Engro Exemp
Private Limited

Engro Vopak
Limited

Engro Powergen
limited
Engro Polymers
& Chemical
Limited

Products

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Engro Urea
Engro DAP
Engro NP
Engro
Zarkhez
Zingro

Competitors

Sunland
Crops
Sunland Crops
care
care

Karshima
Karshima
Fertlizer
Fertlizer

Prime
Agro
Prime Agro
Chemical
Chemical &
&
Fertlizers
Fertlizers

Fauji
Fauji fertlizer
fertlizer

CROSS SECTIONAL FINANCIAL ANALYSIS

BETWEEN ENGRO & FAUJI FERTLIZER
COMPANY (2014 FY)
Liquidity
Gross receivables
1. Days sales in receivables Net sales/365
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Fauji
Quantitativ
e

fertilizer
Engro

824218 / 81240187/365 = 4 days around

781444 / 61424934/365 = 5 days around

fertilizer
While considering both above figures of days sales in
receivables of both companies it is clear that both companies

Qualitative

collect it receivables against its credit sales quickly and not

having problems related collection of receivables as fauji
fertilizer is collecting more speedily than engro and having one
day difference.

Ending inventory
2. Days sales in inventory CGS /365

Fauji
Quantitativ
e

Qualitative

fertilizer
Engro

981750 / 50136749/365 = 7 days

1100922 / 38822423/365 = 10 days

fertilizer
Hereby, fauji fertilizer is converting its inventory into sales
within 7 days whereas, engro is converting it into 10 days
means fauji fertilizer more swiftly convert its inventory into
revenue.

Net sales
3. Account receivable turnover Average Gross Receivables

Fauji
Quantitativ
e

Qualitative

fertilizer
Engro

81240187 / 763259 = 106 times

61424934 / 783385 = 78 days

fertilizer
As considering above figures of both companies fauji fertilizer
is superior than engro as it is collecting its average receivables
106 times in a year than engro fertilizer which have 78 times

figure a difference of 28.

CGS
4. Inventory turnover Average Inventory
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Fauji
Quantitativ
e

50136749/ 641854 = 8 times

fertilizer
Engro

38822423 / 1241293 = 31 times

fertilizer
After comparing both figures engro fertilizer is far leading in it
Qualitative

as it is selling 31 times its inventory in a whole year than fauji

fertilizer who sold it out just 8 times in a year.

5. Account receivable turnover in days

Quantitativ
e

Average Gross Receivables

Net Sales /365

Fauji

763259 / 81240187/365 = 3.42 days

fertilizer
Engro

783385 / 61424934/365 = 4.65 days

fertilizer
After having a look upon above derived figures its clear fauji
Qualitative

fertilizer is swifter to liquidate its average receivables as it

takes just 3 days while engro has to take around 5 days to

liquidate its average Receivables.

Average inventory
6. Inventory turnover in days
CGS /365
Fauji
Quantitativ
e

641854 / 50136749/365 = 4.67 days

fertilizer
Engro

1241294 / 38822423/365 = 11.6 days

fertilizer
While comparing both figures fauji fertilizer takes fewer days in
Qualitative

order to liquidate its inventory whereas engro fertilizer takes

more days in order to liquidate its inventory.

7. Operating cycle
=
Quantitativ
e

( Accounts receivable turnover days ) +(Inventory turnover days)

Fauji fertilizer
Engro

3.42 + 4.67 = 8.1 days

4.65 + 11.67 = 16.32 days

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fertilizer
Operating cycle of fauji fertilizer is 8 days whereas, for engro
Qualitative

its 16 days means double of fauji fertilizer which simplifies that

fauji fertilizer operating cycle is faster than engro. Fauji

fertilizer is far better than engro in this sense.

8. Working capital = Current assets - current liabilities
Fauji
Quantitativ
e

35883228 53818103 = (17934875)

fertilizer
Engro

36296541 - 35556228 = 740313

fertilizer
After deriving both figures of working capital its vivid that fauji
fertilizer not having enough working capital in order for its daily
requirement as it goes negative because its current liabilities
Qualitative

are much higher than its current assets in contrast, engro has
enough resources and amount of current assets are higher
than current liabilities which is why its working capital is
positive.

9. Sales to working capital

Fauji
Quantitativ
e

Net sales
Average Working Capital
81240187 / (12963309) = (6.26)

fertilizer
Engro

50128936 / 4216362 = 11.8

fertilizer
After comparing the figures of both companies sale to working
capital figures it is revealed that fauji fertilizer is not in good
Qualitative

position in this regard as it has not enough working capital to

support its sales on the other side engro is using its working
capital effectively in order to produce net sales.

10.

Cash ratio

Ca sh+ Cash equivalent+ Marketable Securities

Total current liabilities

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Quantitativ
e

Fauji

1173767 / 53818103 = 0.02

fertilizer
Engro

4188528 / 35556228 = 0.11

fertilizer
Fauji fertilizer has not much cash or its equivalent to pay off its
current liabilities as they have just 2 % in accordance of it on
Qualitative

the other hand engro fertilizer is superseding by 9 times than

fauji fertilizer and has much ability to pay off its current
obligations by using cash or cash equivalent.

11.

Quantitativ
e

Current ratio

Total current assets

Total current libilities

Fauji

35883228 / 53818103 = 0.66

fertilizer
Engro

36296541 / 35556228 = 10.3

fertilizer
After evaluating current ratios of both companies its plain that
engro fertilizer is good and in a strong position in order to meet
its current obligation by current assets as they have 10 times
Qualitative

more current assets than current liabilities whereas, fauji

fertilizer has not much current assets for this regard and it has
more current obligations than its current assets which is not a
good sign for the fauji.

12.

Quantitativ
e
Qualitative

Acid test ratio

Total current assetsinventories

Total current libilities

Fauji

35883228 - 981750 / 53818103 = 0.64

fertilizer
Engro

36296541 - 1100922 / 35556228 = 0.98

fertilizer
Following ratio compares that either company has enough cash
plus cash equivalents and accounts receivable to the current

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liabilities as engro fertilizer is also in stronger position than
fauji fertilizer as after excluding inventory from current assets
their current assets are around alike with their current liabilities
but on the other hand fauji fertilizer still not have good figures
as current assets after excluding inventories is still less than
current liabilities means fauji fertilizer is not in the position to
pay off its current liabilities by using current assets as current
assets are much less than current obligations.

Long term debt paying ability ratio

13.

Time interest earned ratio

Recurring earnings , excluding interes t expense , tax expense ,equity earnings

including non contorlling interest

Interest expenseincluding capitilized interest

Quantitativ
e

Fauji

24671771 / 848940 = 29.1 times

fertilizer
Engro

17388971 / 6625397 = 2.6 times

fertilizer
After assessing time interest earned ratio of both companies it
is pretty much clear that fauji fertilizer is in good health in this
regard as if it interest expense amplified by 29 times it will
Qualitative

have ability to pay it off from its operating profit whereas,

engro fertilizer has not much ability than fauji fertilizer to pay
off its interest expense as they have just 2 times ability to pay
off this expense by using their operating profit.

14.

Fixed charge coverage ratio

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Recurring earnings , excluding interest expense , tax expense ,equity earnings
including non contorlling interest +interest portion of rental

Interest expense including capitilized interest +interest portion of rental

Quantitativ
e

Fauji

24671771 + 30117 / 848940 + 30117 = 28.1

fertilizer
Engro

times
17388971 + 1362300 / 6625397 + 1362300 =

fertilizer
2.3 times
After judging fixed charge coverage ratio of both companies it
is obvious that fauji fertilizer is far better and dominant in this
regard as well as if it interest plus interest portion of rental or
Qualitative

lease expense augmented by 28 times it will have capacity to

pay it off from its operating profit whereas, engro fertilizer has
not much capability than fauji fertilizer to pay off it off as they
have just 2 times knack.

15.

Debt ratio

Total libilities
Total assets

Fauji
Quantitativ
e

60892131 / 86561662 = 0.70

fertilizer
Engro

76993530 / 111471625 = 0.69

fertilizer
After deriving debt ratio of both companies it disclose that fauji
fertilizer and engro fertilizer is almost close and near to have
Qualitative

same debt ratio as it is around 0.7 which simplifies that both

companies have 30 times more assets in order to meet its total
liabilities.

16.
Quantitativ
e

Debt equity ratio

Fauji

Total libilities
Total equities

60892131 / 25669531 = 2.37

fertilizer

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Engro

76993530 / 34478095 = 2.23

fertilizer
After figuring out debt equity ratios of both companies it
illustrates that both companies are financed through external
Qualitative

debts more than its share holder equity as fauji fertilizer total
liabilities are 2.4 times more and engro fertilizer total liabilities
are 2.2 times more than total equities.

17.

Quantitativ
e

Debt to tangible net worth ratio

Fauji fertilizer
Engro

tallibilities
Total equityintangibles

60892131 / 25669531 - 1611204 = 2.53

76993530 / 34478095 - 118336 = 2.24

fertilizer
After figuring out debt equity ratios of both companies it shows
that fauji fertilizer has taken more external debts in order to
finance its tangible assets as liabilities are 2.53 times than

Qualitative

equity and intangibles portion whereas, on the other side engro

fertilizer has taken somehow less external debts in order to
finance its tangible assets as compare with fauji fertilizer
because its ratio is minor than fauji fertilizer but by and large
the difference is not so big.

Profitability ratio

18.

Net profit margin ratio

Fauji
Quantitativ
e

fertilizer
Engro

Net income before non recurringitemsnon controlling interest

net sales

18170760 / 81240187 = 0.22

8207960 / 61424934 = 0.13

fertilizer
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While evaluating both companies net profit margin ratio
reveals that fauji fertilizer produce more net income through its
Qualitative

net sales for the year 2014 whereas, engro fertilizer is lagging
by .9 and produce less net income through its net sales as it
stands 0.13 than fauji fertilizer.

19.

Quantitativ
e

Gross profit margin ratio

Gross profit
Net sales

Fauji

31103438 / 81240187 = 0.38

fertilizer
Engro

22602511 / 61424934 = 0.36

fertilizer
While considering both companies gross profit margin ratio
reveals that there is no much difference the ratios of both
Qualitative

companies but fauji fertilizer hereby also have a lead of .02

which is not much significant than the figure of engro fertlizer
by and large, fauji fertilizer produce more gross profit than
engro fertilizer.

20.

Quantitativ
e
Qualitative

Operating income margin

Operating income
net sales

Fauji

24671771 / 81240187 = 0.30

fertilizer
Engro

17388971 / 61424934 = 0.28

fertilizer
After figuring out following ratios of both companies it shows
that fauji fertilizer as previous mention trend is superseding by
0.02 than engro fertlizer as it produce more operating income
of 0.30 than engro fertlizer which stands at 0.28 illustrate that
fauji fertlizer is superior in generating operating income
through its gross profit by managing its expense more

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effectively.

21.

Total asset turnover

Fauji
Quantitativ
e

fertilizer
Engro

Net sales
Average total assets
81240187 / 77195360 = 1.05

61424934 / 110700206 = 0.55

fertilizer
Considering the total asset turnover ratios of both companies
clarifies that fauji fertilizer ratios is much higher than engro
Qualitative

fertlizer is implying that fauji fertlizer is using its assets more

efficiently in order to produce net sales in corresponded engro
fertlizer.

22.

Quantitativ
e

Operating asset turnover

Net sales
Average operating assets

Fauji

81240187 / 19269043 = 4.21

fertilizer
Engro

61424934 / 77139018 = 0.80

fertilizer
Taking into consideration of both companies ratios figures
specify that fauji fertlizer is utilizing its operating assets more
Qualitative

efficiently in order to generate sales than engro as it figures

stands at 4.21 in contrast, engro having 0.80 far less than fauji
fertlizer. Fauji fertlizer is racing away in a sense.

23.

Quantitativ
e

Sales to fixed asset

Average
Net sales

assets

Fauji

81240187 / 46089904 = 1.76

fertilizer
Engro

61424934 / 77369058 = 0.79

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fertilizer
Taking into account of both companies ratios figures state that
fauji fertlizer is exercising its fixed assets more creatively &
Qualitative

efficiently in order to generate sales than engro as it figures

stands at 1.76 in distinguish, engro having 0.79 far less than
fauji fertlizer.

24.

Quantitativ
e

Return on assets

Net income before non recurringitemsnon controlling interest

Average total assets

Fauji

18170760 / 77195366 = 0.24

fertilizer
Engro

8207960 / 110700206 = 0.07

fertilizer
After appraising return on asset ratio of both companies it is
Qualitative

pretty much clear that fauji fertilizer utilized its assets much
efficiently and in return produced more earnings as it figure
super cede by 3 times almost than engro.

25.

Return on total equity

Net income before non recurringitemsnon controlling interest dividend

on redeemable preferred stock

Average total equity

Fauji
Quantitativ
e

fertilizer
Engro

18170760 / 25410397 = 0.71

8207960 / 29773664 = 0.27

fertilizer
While evaluating both companies ratios of return on total
Qualitative

26.

equity indicates that fauji fertlizer make their shareholders

investment more productive for the sake of generating net
earnings for the year than engro fertlizer.
Return on common equity

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Net income before non recurringitemsnon controlling interest preferred dividend

Average total common equity

Fauji
Quantitativ
e

18170760 / 25410397 - 0 = 0.71

fertilizer
Engro

8207960 / 29773664 - 0 = 0.27

fertilizer
As both companies have not issued any preferred shares
eventually preferred dividend will result in a simple zero for
both sides and return on common equity ratio will have figures
Qualitative

alike return on equity for both companies at where fauji

fertlizer

efficiently

used

their

common

shareholders

investment in regarding producing of net income for their

common shareholders.
27.

Return on investment

Net income before non recurringitemsnon contr olling interest

+interest expense(1tax )

Average (long term liabilities+total equity)

Fauji
Quantitativ
e

18170760 / 33126596 = 0.54

fertilizer
Engro

8207960 / 81585420 = 0.10

fertilizer
After having a glance of both companys following ratio
exemplifies that fauji fertlizer produced much greater net
Qualitative

earnings after effectively utilizing its total investment rather

than

engro

fertlizer

simplifies

that

fauji

fertlizer

much

productive than engro.

28.

Earnings per share

Net income preferred dividend

Number of shares outstanding

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Fauji
Quantitativ
e

18170760000 - 0 / 1272238247 = 14.28 RS

fertilizer
Engro

8207960000 - 0 / 1400000000 = 6.29 RS

fertilizer
EPS amount of both companies are as fauji fertlizer stands at
14.28 and engro fertlizer it is 6.29 indicates that fauji fertlizer
Qualitative

shareholder can earn more amount in against of their share in

that company rather than engro fertlizer. Like fauji fertlizer can
earn 14 RS whereas, engro fertlizer can earn just 6 RS. Fauji

29.

Quantitativ
e

fertlizer shareholder has more benefit.

Dividend per common share
Dividend payout ratio
Earnings per share
Fauji fertilizer
Engro

13.65 / 14.28 = 0.95

3 / 6.29 = 0.48

fertilizer
While comparing both companies ratios of dividend payout
shows fauji fertlizer gives out around 95 % of their annual

Qualitative

earnings

to

their

shareholders

and

retained

very

less

proportion from net earnings whereas, engro fertlizer retained

around half of their earnings and give out rest of the amount to
their shareholders.

30.

Quantitativ
e
Qualitative

Dividend yield

Fauji fertilizer
Engro

Dividend per common share

Market price per common share
13.65 / 117.1 = 0.12
3 / 85 = 0.04

fertilizer
After evaluating both companies dividend yield ratio indicating
that dividend yield ratio of fauji fertlizer have same trend as
we observe in previous means hereby, its also more than
engro in a simple sense fauji fertlizer is giving more dividend to
its shareholders as compare to market price of its share like its
market price of the share is 117 RS and it is giving around 14

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RS out of it. For engro fertlizer its market price of the share is

31.

Quantitativ
e

85 RS and is giving 3 RS as dividend out of it.

Market price of common share
P/E ratio
Earnings per share
Fauji fertilizer
Engro

117.1 / 14.28 = 8.2

85 / 6.29 = 13.5

fertilizer
While considering both companies P/E ratios shows that P/E
ratio of engro fertlizer is more than fauji fertlizer means engro
stock is trading multiple of 13.5 and fauji stock is trading a

Qualitative

multiple of 8.2 in other sense we can say an investor is ready

to give 8.2 times more for each RS earning of fauji fertlizer and
13.5 times more for each RS earning of engro. In a clear sense

32.

P/E ratio of engro is better than fauji fertlizer.

Net income all dividends

% of retained earnings ratio

Net income
Fauji

Quantitativ
e

fertilizer
Engro

18170760000 - 17582658000 / 18170760000 =

0.04
8207960000 - 4200000000 / 8207960000 =

fertilizer
0.49
While comparing both companies % of retained earnings
stated that more % of earnings is retained by engro around half
Qualitative

of their earnings unlike fauji fertlizer who just maintained and

secured just 4% out of total annual earnings in retained
earnings account and give out 96% of their earnings to their
shareholders as dividend.

33.

Quantitativ
e

Book value per share ratio

Fauji

Total stockholders equity preferred stock

Total number of shares outstanding

25669531000 - 0 / 1272238247 = 20.17 RS

fertilizer

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Engro

34478095000 - 0 / 1400000000 = 24.6 RS

fertilizer
After evaluating both ratios of the company of this ratio reveals
that engro fertlizer has more book value than fauji fertlizer as
Qualitative

companies goes to liquidate engro fertlizer shareholder will get

more amount against per share 24.16 than fauji fertlizer
shareholder. Book value per share of engro fertlizer is greater
than fauji fertlizer.

Overall interpretation
Wrapping up, after performing detail analysis of both companies financial ratios I have come
to know several financial aspects of both companies for the year 2014.
In concerning liquidity, while considering both companies they collect their receivables
against its credit sales quickly and not having problems related collection of receivables but
fauji fertilizer is quicker in this regard. Fauji fertilizer is superior to engro as it is collecting its
average receivables 106 times in a year than engro fertilizer which have 78 times figure a
difference of 28 exist over there additionally, fauji fertilizer is swifter to liquidate its average
receivables as it takes just 3 days while engro has to take around 5 days to liquidate its
average Receivables. Regarding inventory fauji fertilizer is converting its inventory into sales
more rapidly than engro. But engro fertlizer is selling 31 times its inventory in a whole year
than fauji fertilizer who sold it out lesser times than engro fauji fertilizer takes fewer days in
order to liquidate its inventory whereas engro fertilizer takes more days in order to liquidate
its inventory. Inventory management and account receivable policy or regulations of fauji
fertlizer is good than engro. Talking about Operating cycle, operating cycle of engro fertlizer
is twice of fauji fertilizer simplifies that fauji fertilizer operating cycle is faster than engro.
Fauji fertilizer not having enough working capital in order for its daily requirement as it goes
negative because its current liabilities are much higher than its current assets in contrast,
engro working capital is positive. Fauji fertilizer is not in good position as it has not enough
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working capital to support its sales on the other side engro is

using its

working capital effectively in order to produce net sales.

Fauji

fertilizer has not much cash or its equivalent on the other

hand engro

fertilizer has much ability to pay off its current obligations.

Consequently and likewise, Current ratio of engro is much

better than

fauji fertlizer. Overall engro fertlizer is in good position

than

fauji

fertlizer in concerning liquidity point of view as fauji fertlizer has not enough current assets
to pay off its current obligations but fauji fertlizer inventory and account receivable
management is far better than engro fertlizer.
In accordance of long term debt paying ability it is pretty clear that fauji fertilizer is in good
health in this regard as it has much more capacity to pay it off than engro fertilizer it is
obvious that fauji fertilizer is dominant over here. Debts ratios of both companies almost
close and near to have same debt ratio clarify both companies have enough assets to meet
its long term liabilities. Both companies are financed through external debts more than its
share holder equity. Fauji fertilizer has taken more external debts in order to finance its
tangible assets whereas, on the other side engro fertilizer has taken somehow less external
debts in order to finance its tangible assets but overall the difference is not so big.
In the sense of profitability after calculating and evaluating both companies net profit, gross
profit margin, asset turnover, operating asset turnover, fixed asset turnover and return on
asset/equity/common equity/total investment ratios exemplifies that fauji fertilizer is much
better in profitability point of concern as it remains much productive for their shareholders
for the year 2014. Following company generate more turnover and earnings for their
shareholders after exercising their assets and investment in far better way than engro
fertlizer. In all above mention ratios fauji fertlizer is leading against engro fertlizer. In
accordance of fauji fertlizer they remain more profitable after having a look on profitability
ratios which I derived in previous phase because profitability figures raced far away than
engro fertlizer. For investors point of view, P/E ratios of engro fertlizer are more than fauji
fertlizer, engro stock is trading multiple of 13.5 and fauji stock is trading a multiple of 8.2.
Engro fertlizer has more book value than fauji fertlizer as companies goes to liquidate engro
fertlizer shareholder will get more amount against per share (24.16) than fauji fertlizer
shareholder on the other side fauji fertlizer shareholders can earn more amounts in return of
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their share rather than engro fertlizer. Fauji fertlizer gives out

around

95 % of their annual earnings to their shareholders and retained very less proportion from
net earnings whereas, engro fertlizer retained around half of their earnings of 2014 year
furthermore; Dividend payout ratio of fauji fertlizer is twice over engro.

In

nut

shell,

in

conclusion

both

companies

performance remain consistent in last some years but

on the whole fauji fertlizer is better for following
reasons as they have tight account receivables policies,
better inventory and accounts receivables management
but somehow fauji fertlizer is facing current assets
management problems but after looking its previous
history its current assets is much better than engro.
Fauji fertlizer has much more capacity to pay off its
long term debts in contrast engro has not much
capacity to pay off their long term debts simplifies that
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chances of risks more associated with
engro than fauji fertlizer. An investor will certainly will
go and would like to invest in fauji as fauji fertlizer has
thirty times capacity to pay off its debts whereas engro
can just pay it off for lesser times. Taking in account
fauji fertlizer as they are effectively or more creatively
utilizing their assets and owner investments in order to
generate more revenue, gross & operating profit and
net earnings rather than engro, fauji fertlizer remained
and raced away in this than engro. P/E is somehow less
of fauji fertlizer than engro fertlizer but on the other
hand fauji fertlizer earning per share ratio is around
doubled than engro and their dividend per share is
much attractive than engro which will definitely attract
investors to invest in fauji fertlizer additionally, fauji
fertlizer gave out 96% of their annual profit to their
shareholders as dividend whereas engro retained half
amount of their earnings which will lead to expect an
investor to invest in fauji fertlizer as earnings are more
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and more % of dividend is given out

to

the shareholders by fauji fertlizer and eventually an

investor will think after taking in account all above
mentioning facts that if he invest in fauji fertlizer there
will be more chances to get more amount in return and
his investment will be more secured and risk free. Thus,
his preference will be more towards fauji fertlizer than
engro. Thats it.

My learnings
There are collection of things which I have learned during this kind of project
the first thing which is worth mentioning here that how to perform financial
analysis in details when we are analyzing a company financial statement. Major
learning experience was advantageous I get to know a lot of other things which
I have never have idea or experienced before and I just read it out theoretically
on books. This project help me out how to locate different values of ratios from
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companys financial data after performing detail
analysis how much these ratios are mandatory and
important for investors when he is going to invest in a
company

additionally

these

ratios

elaborate

comprehensively financial statistic and performance of a firm. After performing

this analysis I understand the worth of these ratios and how much important
they are.

Supplementary I learnt how time management is significant while

you are engage in a lot of assignments, how to execute things on time and how
to plan them so that we can achieve them on time.
By all this it was a kind of productive & fruitful experience from all aspects
regarding financial aspects of a company and an investors I am pretty sure the
cross sectional analysis which I performed in this project will definitely prolific
for me in coming future INSHALLAH.

Appendices
Websites

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www.engrofertilizer.com.pk
www.faujifertlizer.com.pk

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