0 views

Uploaded by rizwan zia

ratio analysis DGK cement

- Creative Analysis of Financial Report
- Consider These Tips When Developing Your Collection Strategy
- analysis
- odel 2009-2010
- THE RAYMOND - Ratio analysis
- 4Q04 - Earnings Release
- 232746312 Ratio Analysis at Jk Tyre Industries Ltd
- Final Assign (3)
- Videcon Accounts Ppt
- Chapter 3 & 4
- Financial Ratio Analysis
- Laura Ashley Holdings Plc_Group9
- Pages From Key Concepts
- Ratio Analysis _Idea Cellular
- 12 x10 Financial Statement Analysis
- Financial accounting4.pdf
- Cost Accouting
- vacas
- Ratios
- Model PAPER-Analysis of Financial Statement -MBA-BBA

You are on page 1of 21

Ratio Analysis

DGK Cement

SUBMITTED TO

SIR. TANVIR YASIN

SUBMITTED BY

RIZWAN AHMAD BC15238

AWAIS BC15255

JALEES MUSHTAQ BC15220

NOMAN AHMAD BC15232

HAMZA IQBAL BC15252

D.G. Khan Cement Company Ltd

Acknowledgment

Am extremely thankful to Allah Almighty who has

enabled us to complete this report on time and in the

manner it was required. He provided menthe resources to

capture the knowledge and avail the opportunities in the

world. It is also a matter of immense pleasure for me to

express my gratitude to my Teacher Sir. Tanvir Yasin

who has been a source of real inspiration for us. His

experiences formed an important part in this report. His

guidance and encouragement provided us a mean to step

ahead towards my objective in a proper way. I also wish

to acknowledge the support of all my friends, who helped

in completing this report. Without their support and

cooperation it was not possible for me to complete this

report.

D.G. Khan Cement Company Ltd

Table of Contents

Introduction ............................................................................................................................................ 1

Financial statements ............................................................................................................................... 3

Liquidity Ratio ......................................................................................................................................... 6

Current Ratio ....................................................................................................................................... 6

Liquid/Quick/Acid test ratio ................................................................................................................ 6

Absolute liquid ratio............................................................................................................................ 7

Activity Ratio OR Efficiency Ratio............................................................................................................ 8

Inventory turnover ratio ..................................................................................................................... 8

Creditor turnover ratio ....................................................................................................................... 9

Debtor Turnover Ratio ........................................................................................................................ 9

Debtor Turnover Ratio ...................................................................................................................... 10

Working Capital Turnover Ratio........................................................................................................ 10

Total asset turnover ratio ................................................................................................................. 11

Profitability Ratios................................................................................................................................. 11

GP Ratio............................................................................................................................................. 11

Operating Profit Ratio ....................................................................................................................... 12

Net Profit Ratio ................................................................................................................................. 12

Operating ratio.................................................................................................................................. 13

Solvency Ratio ....................................................................................................................................... 13

Debt To equity Ratio ......................................................................................................................... 13

Debt Ratio ......................................................................................................................................... 14

Interest Coverage Ratio .................................................................................................................... 15

Proprietary Ratio ............................................................................................................................... 15

Return on investment ratios ................................................................................................................. 16

EPS (Earning per share) ratio ............................................................................................................ 16

Earnings Ratio ................................................................................................................................... 16

Capital employed ratio...................................................................................................................... 17

Return on shareholder fund ............................................................................................................. 18

Conclusion ............................................................................................................................................. 18

D.G. Khan Cement Company Ltd

Introduction

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.

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.

Establishment

DGKhan Cement Company Limited (DGKCC) was established under the management

control of State Cement Corporation of Pakistan Limited (SCCP) in 1978 as private limited

company. DGKCC started its commercial production in April 1986 with 2000 tons per day

(TPD) clinker based on dry process technology.

Acquisition by Nishat

Nishat acquired DGKCC in 1992 under the privatization initiative of the government. After

privatization the company was listed on Stock Exchanges in September 1992.

The Company is principally engaged in the manufacturing and sale of Cement. The Company

is member of All Pakistan Cement Manufacturers Association (APCMA) and Lahore Chamber

of Commerce and Industry (LCCI).

1

D.G. Khan Cement Company Ltd

D.G. Khan Cement Company Limited, (DGKCC) is amongst largest cement manufacturers of Pakistan

with a production capacity of 14,000 tons per day (4.200 million tons/annum). DGKCC has three

cement plants, two plants located at Dera Ghazi Khan and one at Khairpur Distt. Chakwal. All the plants

are based on latest Dry Process Technology.

The Company operates through a countrywide distribution network managed by different Regional

Sales offices. The Company’s products are preferred on projects of national repute both locally and

internationally due to the un-parallel and consistent quality. The Company is listed on all the Stock

Exchanges of Pakistan.

CONTRIBUTION TO ENVIRONMENT

DGKCC production processes are environment friendly and comply with the World Bank’s

environmental standards. It has been certified for “Environment Management System” ISO 14001 by

Quality Assurance Services, Australia. The company was also certified for ISO-9002 Quality

Management System) in 1998. By achieving this landmark, DG Khan Cement became the first and only

cement factory in Pakistan certified for both ISO 9002 & ISO 14001...

ALTERNATIVE FUELS

Fuel, being one of the major inputs in cement manufacturing cost and ever increasing prices has forced

DGKCC to look for alternate cheaper fuels in order to maintain its results positive. Study was carried

to find out suitable fuels available in the market, DGKCC started with local coal having calorific value

ranging 5000-6000 Kcal/ton. After continuous efforts and search, number of alternate fuels are in use

e.g. rice husk, poultry waste, corn cob, corn stick, cotton dust, cotton sticks etc. Study is underway to

explore availability and usage of different other alternate fuels. By using alternate fuels DGKCC is also

contributing its share towards environment control.

2

D.G. Khan Cement Company Ltd

Financial statements

3

D.G. Khan Cement Company Ltd

4

D.G. Khan Cement Company Ltd

5

D.G. Khan Cement Company Ltd

Liquidity Ratio

These ratios measure the capacity of the business to pay its short term debts.

Current ratio

Liquid ratio

Absolute liquid ratio

Current Ratio

Current ratio, also known as liquidity ratio and working capital ratio, shows the proportion

of current assets of a business in relation to its current liabilities.

current asset

Current ratio = current liability

31426342

Current ratio 2015 = 6583476

= 4.77:1

30835521

Current ratio 2016 = 10056634

= 3.07:1

In 2015 its currents ratio is 4.77 and in 2016 it decrease to 3.07. It means company is still in good

position to pay its current liability from its current assets. Because general benchmark 2:1.

Quick Ratio, also known as Acid Test Ratio, shows the ratio of cash and other liquid

resources of an organization in comparison to its current liabilities.

Quick ratio = current liability

31426342 – 1188376

Quick ratio 2015 = 6583476

= 4.6

30835521 – 766633

Quick ratio 2016 = 10056634

= 2.9

According to definition, Acid Test Ratio Company should have ability to pay its short term debts

from liquid asset. In 2015 quick ratio is 4.6 and in 2016 it decrease to 2.9. But company is still in

good position to pay short term debts from liquid assets. Because general benchmark is 1:1.

6

D.G. Khan Cement Company Ltd

In addition to computing current and quick ratio, some analysts also compute absolute liquid ratio to

test the liquidity of the business. Absolute liquid ratio is computed by dividing the absolute liquid

assets by current liabilities.

Absolute liquid assets

Absolute liquid ratio = Current liabilities

here absolute liquid assets = Cash + Bank + marketable securities

In 2015

257723

Absolute ratio = 6583476

= 0.04:1

In 2016

7009844

Absolute liquid ratio = 10056634

= 0.7

In both years company is in position to pay its current liabilities from absolute liquid assets. General

benchmark is 0.5:1

7

D.G. Khan Cement Company Ltd

Purpose of these ratios is to measure the how efficiently business is utilizing his reserves for generating

revenues.

Inventory turnover ratio

Creditor turnover ratio

Debtor turnover ratio

Working capital turnover ratio.

It measures how many times a company has sold and replaced its inventory during a certain

period of time. Higher the ratio more favorable for the business

CGS

Inventory turnover ratio = Avg.stock

Avg.Stock = 2

In 2015

1348742 + 1188376

Avg.Stock =

2

= 1268559

16649411

Inventory turnover ratio =

1268559

= 13 times

365

Inventory conversion period = 13

= 28 days

In 2016

1188376 + 766633

Avg.Stock = 2

= 977505

= 17.4 times

365

Inventory conversion period = 17.4

= 21 days

In 2015 company sold its avg.stock 13 times and in 2016 company sold its avg.stock 17.4 times.

DGK took 28 days in 2015 and 21 days in 2016 to sold its stock.

8

D.G. Khan Cement Company Ltd

It means how many times a company can pays off to its creditors during a year

Creditor turnover ratio = Avg.payable

In 2015

16489045

Creditor turnover ratio = 4018079

= 4 times

365

Creditor conversion period = 4

= 91 days

In 2016

16613823

Creditor turnover ratio = 4707209.5

= 3.5 times

365

Creditor conversion period =

3.5

= 104 days

Company can pays off its creditors 4 times in 2015 and 3.5 times in 2016. We can conclude

that

DGK paid its trade creditors after an average period of 97.5 days from its credit purchases

it shows how many times and how long it takes for a business to recover the revenue receipts

from its trade receivables.

In 2015

Debtor turnover ratio = avg.recievable

26104611

=

804909

= 32.43 times.

365

Receivable conversion period = 32.43

= 11 days

9

D.G. Khan Cement Company Ltd

In 2016

29703558

Receivable turnover ratio = 795465

= 37.3 times

365

Receivable conversion period = 37.3

= 10 days

DGK receives its average debtors 32.43 times in 2015 and 37.3 times in 2016. It took DGK an

average of 10.5 days to collect revenue receipts from its trade debtors.

It provides useful idea of how efficiently working capital is used to generate revenue .The

higher the ratio, the better is the utilization.

CGS

Working capital turnover ratio = AVG.working capital

In 2015

= 31426342 – 6583476

= 24842866

16649411

Working capital turnover ratio = 24842866

= 0.67 times

In 2016

= 20778887

24842866 + 20778887

Average working capital = 2

= 22810877

17035566

Working capital turnover ratio =

22810877

= 0.74 times.

It means each 1 PRs invested in working capital has contributed only .74 in 2016 and .67 in

2015 towards total sales revenue. Working capital turnover ratio of the company is below 1 in

both years. It indicates that company is not using efficiently its working capital.

10

D.G. Khan Cement Company Ltd

Asset turnover ratio is the ratio of the value of a company’s sales or revenues generated relative

to the value of its assets. The higher the asset turnover ratio, the better the company is

performing

sale

Total asset turnover ratio = total asset

In 2015

26104611

Total asset turnover ratio =

74391443

= 0.35

In 2016

29703758

Total asset turnover ratio = 83418265

= 0.35

Results indicates that 1PRs invested in fixed asset give .35 towards the total sales revenue. In

both years ratio is blow 1 which shows that company is not efficiently deploying its assets in

generating revenues.

Profitability Ratios

These ratios measure the ability of a business to generate earnings compare to its expenses and

other relevant costs incurred during a specific period of time.

GP ratio

NP ratio

Operating profit ratio

Operating ratio

GP Ratio

GP Ratio is profitability ratio that shows the relationship between gross profit and total net

sales. It evaluate the operational performance of the business. Generally, a higher ratio is

considered better.

GP

GP ratio = net sales x 100

In 2015

9455200

GP ratio = 26104611 x 100

= 36.22%

11

D.G. Khan Cement Company Ltd

GP Ratio

In 2016

12668192

GP ratio = 29703758 x 100

= 42.46%

This means DGK earns 36.22% in 2015 and 42.465 in 2016 on the one hundred in gross margin.

Ratio is the percentage of operating profit (i.e. profit before interest and tax) relative to the

revenue earned during a period.

operating profit

Operating profit ratio = x 100

net sales

In 2015

9828681

Operating profit ratio = x 100

26104611

= 37.65%

In 2016

12611195

Operating profit ratio = x 100

29703758

= 42.25%

OP Margin of 37.65% and 42.25% means that every 100 PRs of sale earns a profit of 37.65 % in 2015

and 42.25% in 2016 for the business before taking into account taxation, interest expense and other

income.

Net Profit Ratio is the percentage of net profit relative to the revenue earned during a

period.Net Profit Ratio is also known as Net Profit Margin Percentage and NP Margin.

net profit

Net profit ratio = x 10

net sales

In 2015

7624680

Net profit ratio = 26104611 x100

=29.21%

12

D.G. Khan Cement Company Ltd

In 2016

8789672

Net profit ratio = x100

29703758

= 29.59%

A net profit margin of 29.59 means that every 100 PRs sale contributes PRs29.59 towards the net

profits of the business.

Operating ratio

Operating ratio (also known as operating cost ratio or operating expense ratio) is computed by dividing

operating expenses of a particular period by net sales made during that period. Like expense ratio, it is

expressed in percentage. Less the ratio more favorable for the business.

CGS + operating expenses

Operating ratio = net sale x 100

In 2015

16649411+1946854

Operating ratio = 26104611 x 100

= 71.23%

In 2016

17035566+2436050

Operating ratio = x 100

29703758

= 65.6%

The operating ratio is 71% and 65.6% it means 71% and 65.6% of the sales revenue would be used to

cover cost of goods sold and operating expenses of DGK cement in both years respectively

Solvency Ratio

Purpose of this ratio is to measure the long term debt paying capacity of a company.

Debt-to-Equity Ratio, often referred to as Gearing Ratio, is the proportion of debt financing in an

organization relative to its equity.

Debt to equity ratio = equity

In 2015

5511896

Debt to equity ratio = 62296071

13

D.G. Khan Cement Company Ltd

= 0.09

In 2016

7578202

Debt to equity ratio = 65783429

= 0.12

The debt to equity ratio of DGK Company is .12 and .09. It means the liabilities are 12% and 9% of

stockholders equity or we can say that the creditors provide only 12 and 9 PRs for each 100 PRs

provided by stockholders to finance the assets

Debt Ratio

It can be interpreted as portion of company’s assets that are finance by debt.

total debt

Debt ratio =

total asset

In 2015

Debt ratio = 12095372/74391443

= 0.16

In 2016

17634836

Debt ratio = 83418267

= 0.21

This is a relatively low ratio and implies that DGK will be able to pay back his loan. DGK shouldn’t

have a problem getting approved for loan.

14

D.G. Khan Cement Company Ltd

Interest Coverage Ratio, also known as Times Interest Earned Ratio (TIE), states the number of times

a company is capable of bearing its interest expense obligation out of the operating profits earned during

a period.

EBIT

Interest coverage ratio =

interest expense

In 2015

9828681

Interest coverage ratio = 281504

= 34.9 times

In 2016

12611195

Interest coverage ratio = 130451

= 96.6 times

Interest coverage ratio of DGK Company is 96.6 times. It means that the interest expenses of the

company are 96.6 times covered by its net operating income (income before interest and tax).

Proprietary Ratio

The proprietary ratio (also known as net worth ratio or equity ratio) is used to evaluate the soundness

of the capital structure of a company. It is computed by dividing the stockholders’ equity by total assets.

equity

Proprietary ratio = total assets x 100

In 2015

62296071

Proprietary ratio = 74391443 x 100

= 83 %

In 2016

65783429

Proprietary ratio = 83418265 x 100

= 79%

The proprietary ratio is 79%. It means stockholders’ has contributed 79% of the total tangible assets.

The remaining 21% have been contributed by creditors.

15

D.G. Khan Cement Company Ltd

EPS (Earning per share) ratio

Earnings per share (EPS) ratio measures how many dollars of net income have been earned by each

share of common stock.

PAT

EPS =

No.of share

In 2015

7624680

EPS = 438119

= 17.40

In 2016

8789672

EPS = 438119

= 20.06

The EPS ratio is 20.06 PRs It means every share of the common stock earns 20.06 PRs of net income

Earnings Ratio

Price earnings ratios (P/E ratio) measures how many times the earnings per share (EPS) has

been covered by current market price of an ordinary share. It is computed by dividing the

current market price of an ordinary share by earnings per share.

market price per share

Earnings ratio =

earning per share

In 2015

Earnings ratio = 144.7/17.40

= 8.3

In 2016

215.08

Earnings ratio = 20.06

= 10.72

The price earnings ratio of the company is 10. 72It means the earnings per share of the company is

covered 10.72 times by the market price of its share. In other words, PRs1 of earnings has a market

value of PRs10.

16

D.G. Khan Cement Company Ltd

It measures the success of a business in generating satisfactory profit on capital invested. The ratio is

expressed in percentage.

EBIT

Capital employed ratio = capital employed x 100

Capital employed = current asset – current liability + fixed asset – non operating asset

In 2015

Capital employed = 31426342 – 6583476 + 42965101 – 12918182 – 24855796

= 30033989

In 2016

Capital employed = 30835521 – 10056634 + 52582744 – 17819005 – 57938

= 55484688

In 2015

9828681

Capital employed ratio = x 100

30033989

= 32.73%

In 2016

12611195

Capital employed ratio = x 100

55484688

= 22.72%

DGK has a return of 22.72. In other words, every PRs100 invested in employed capital, DGK earns

PRs 22.72.

17

D.G. Khan Cement Company Ltd

Return on shareholders’ fund ratio is a measure of overall profitability of the business and is

computed by dividing the net income after interest and tax by average stockholders’ equity. It

is also known as return on total equity (ROTE) ratio and return on net worth ratio. The ratio is

usually expressed in percentage.

EAT

Return on shareholder fund = equity x 100

In 2015

7624680

Return on shareholder = 62296071 x 100

= 12.24%

In 2016

8789672

Return on shareholder = x 100

65783429

= 13.36%

The return on shareholders’ fund or return on equity (ROE) ratio of DGK limited is 13.36%. It means

for every PRs100 invested by shareholders’, the company earns PRs13.36 after interest and tax.

Conclusion

▪ After applying all the ratios we got an idea that the DGK cement Company is a profitable

firm. Because throughout the analysis of two years, we found that the company is getting

profitable return on short term and long term investment, their profit margin has been

increased as well and they are in the position to pay their debts with in their resources.

18

- Creative Analysis of Financial ReportUploaded byHitesh Patel
- Consider These Tips When Developing Your Collection StrategyUploaded byMarietta Fragata Ramiterre
- analysisUploaded byDaniel Hunks
- odel 2009-2010Uploaded byKanchana Lakmali
- THE RAYMOND - Ratio analysisUploaded byKathir Vel
- 4Q04 - Earnings ReleaseUploaded byUsiminas_RI
- 232746312 Ratio Analysis at Jk Tyre Industries LtdUploaded bysanthoshchandu.santhoshmohan
- Final Assign (3)Uploaded byZaira Raza
- Videcon Accounts PptUploaded byRishika Maheshwari
- Chapter 3 & 4Uploaded byRahul Chakrabarti
- Financial Ratio AnalysisUploaded byhassangcc512
- Laura Ashley Holdings Plc_Group9Uploaded byAnindya Biswas
- Pages From Key ConceptsUploaded bysrin123
- Ratio Analysis _Idea CellularUploaded byRajat Nakra
- 12 x10 Financial Statement AnalysisUploaded byJohn Bryan
- Financial accounting4.pdfUploaded byKetanMehta
- Cost AccoutingUploaded byDaryann Mae Imperial
- vacasUploaded byTelmo Diego
- RatiosUploaded byShahmeer Khan
- Model PAPER-Analysis of Financial Statement -MBA-BBAUploaded byvelas4
- Ratio Analysis And Example.pdfUploaded bythexplorer008
- Financial Analysis of Cherat Cement Company LimitedUploaded byumarpal
- Financial RatiosUploaded bySachini Dinushika Kankanamge
- hello.xlsxUploaded byedmwdnfr
- Cap 8 Performance CH09 SM 1Uploaded byLê Chấn Phong
- Week 5.pptxUploaded byZhaslan Hamzin
- 1st Quater Report-2014Uploaded byJames Black
- Financial Statement AnalysisUploaded byPraveen Jaganathan
- Micro EconomicsUploaded byEngr Benjamin Naworio
- FQQ3_FinancialRatiosUploaded byBryan Eldrick Salvio

- Sensitive Data Protection PlanningUploaded bySp Sach
- FairTradeArticlebyPCUSAUploaded byecmku
- Personality Test QuestionsUploaded byDerek Banas
- 40236814Uploaded byapi-269384046
- Video ConUploaded bysaikripa121
- National FORUM Journals - Partial Listing of Colleges and UnivUploaded byWilliam Allan Kritsonis, PhD
- West Virginia Inmate Search Department of Corrections LookupUploaded byinmatesearchinfo
- Beyond Polemics and Pluralism: The Universal Message of the Qur’anUploaded byShahid.Khan1982
- 01 - copia em ingles.pdfUploaded byrobertoflycat22
- beowulf essayUploaded byapi-267723345
- NPI WorkingUploaded byejyoung928
- ReligiousEducationPublisheUploaded bysarahkim00
- Managing Used and End-Of-Life Products Paul HagenUploaded byashpax7695
- 18 Hole Golf Course Planned for San Cristobal, GalapagosUploaded bySalvaGalapagos
- MARKETING PLAN FOR SUGARCANE JUICE.docxUploaded bySharmin Akter Shanta
- E-COMMERCE VS WOMEN ENTREPRENEURS.Uploaded byIJAR Journal
- culturefood-and-identity-6.pdfUploaded byasmawati
- PolyurethaneUploaded byParth
- Stars Stripes PartsUploaded byMariel Cristaldo
- Paystream Advisors Invoice and Workflow Automation ReportUploaded byJoseph Nellary
- GS_AnglesUploaded byFrancofonia Magreb
- Commensal AmebaeUploaded byGladys Mary Danielle
- 034513Uploaded byDilip Kumar Alugu
- Business Model InnovationUploaded byShweta Sawanee
- History Objects 83Uploaded byjavior1
- f(1)Uploaded byChester Ladera Cabana
- Student Centred and Teacher Centred Learning Environmens in HE What Students ThinkUploaded byjlnhab
- Könyvek - Adrienne Laris Toghraie - Traders SecretsUploaded byTőzsdeOkosságok
- Shirdi Sai BabaUploaded byNaveen Kumar
- Recognizing Criminal 3291Uploaded byIulia