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Liquidity & Leverage Ratio Analysis of

Engro Fertilizer Limited,


Fauji Fertilizer Company Limited
And
Fatima Fertilizer Company Limited for Year 2012, 2013 and 2014

A REPORT SUBMITTED TO THE DEPARTMENT OF MANAGEMENT


SCIENCES, VIRTUAL UNIVERSITY OF PAKISTAN
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE
OF MASTERS IN BUSINESS ADMINISTRATION

SUBMITTED BY
NAME: ABDUL REHMAN
SUDENT ID: MC110401656

Submission Date: 29-11-2015

DEPARTMENT OF MANAGEMENT SCIENCES


VIRTUAL UNIVERSITY OF PAKISTAN

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TABLE OF CONTENT

1 Introduction 4
1.1 Topic Brief Introduction 4
1.1.1 Fauji Fertilizer Company 4
1.1.2 Engro Fertilizer Company 4
1.1.3 Fatima Fertilizer Company 4
1.2 Description 4-5
1.3 Financial Period Under-Consideration for Analysis 5
1.4 Objectives 5
1.5 Significance 5
2 Project Proceedings 5
2.1 Liquidity & Leverage Ratio Analysis 5
2.1.1 Liquidity Ratio 5-6
2.1.2 Leverage Ratio 6
3 Methodology 6
3.1 Data Collection Sources 6
3.2 Data Collection Tools 6
3.3 Data Processing Tools 6-7
4 Interpretations 7
5 Conclusion 7
6 Recommendation 7
7 Introduction Student 7
8 bibliography 7

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1. Introduction

1.1. Topic Brief Introduction:


Ratio analysis is a tool to help evaluate the overall financial condition of a
business. It is useful for preparing and analyzing comparison between customer
and other businesses. The creditors are implementing the decision to make ratio
chart to point the potential of company. The liquidity ratio measure the company
ability to meet its obligation in short time period and whereas the leverage ratios
measure the contribution of stockholder and creditors.

1.1.1. Fauji Fertilizer Company:


Enjoying the largest share of fertilizer market, registered 4.7 per cent
increase in profit It also declared second interim dividend of 30 per cent
making the total payout 55 per cent so far. The 22.7 per cent increase in
sales may be attributed to higher sales volume and 3 per cent increase in urea
prices since January this year. A 29 per cent increase in cost of goods sold
decreased its gross margin. The decline in operating margins highlights the
relatively difficult operating environment for the company. The 32 per cent
decline in other income is due to enhanced lending to FFC-Jordan, the
acquisition of PSFL and decline in its return on deposits. The mark-up
costs of PSFL's merger did not reflect in half yearly results. However,
financial charges are expected to increase significantly during the second
half of this year.
1.1.2. Engro Chemical:
Engro Fertilizers Limited is a subsidiary of Engro Corporation and a
renowned name in Pakistan’s fertilizer industry. It is traded on the stock
market under the symbol ‘EFERT. Engro holds a vast, nationwide production
and marketing infrastructure and produces leading fertilizer brands
optimized for local cultivation needs and demand. Engro is also a leading
importer and seller of Phosphate products, which are marketed extensively
across Pakistan as phospatic fertilizers.
1.1.3. Fatima Fertilizer:
The Fatima Fertilizer Company Limited was incorporated on December
24, 2003, as a joint venture between two major business groups in Pakistan
namely, Fatima Group and Arif Habib Group.The foundation stone of the
company was laid on April 26, 2006 by the then Prime Minister of
Pakistan. The construction of the Complex commenced in March 2007 and is
housed on 950 acres of land.

1.2. Description:
The aim to study the above mentioned companies are to make comparison of
three different years and analysis their financial year with liquidity and leverage
ratio. The research on these companies will bring the factual view of the
organizations. The listed firms are playing very prominent in fertilization sector

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and having highly possessive status in Pakistan fertilize market. The purpose of-
this research project is to make analysis of these three companies in respect of
financial statement and liquidity and leverage ratios and comparison of different
collection of data’s.
1.3. Financial Period Under-Consideration for Analysis:
FY2012, 2013 & 2014 Financial Year are to be under consideration for analysis.

1.4. Objectives:

The objectives of this study are to assess the performance and comparison of
listed companies in regard financial situation and different ratios to bring factual
view of organization conditions. The study and research on topic will boost the
knowledge and make clarity, how to pose the research in writing style.

1.4.1. To measure that which company has ability and enough cash to meet its
short and long term obligations & payment of its debts.
1.4.2. To examine that which the company is more profitable and which is loss.

1.4.3. To observe the performance of companies and compare it with its listed
years.

1.4.4. To examine the financial position of all listed companies.

1.5. Significance:

The research will bring the facts about the ability and performance of listed
organization in view of financial ratios analysis. The study and research will
bring very important information for stakeholder and investor and review the
comparison for their future investments purpose and for improvement of their
business in light of this study. This study will come with solution of different
financial problem and will explore the way of correctness. The research will be
helpful for creditor and debtor in determining which of the selected companies
have a good position for lending and borrowing funds. The outcomes of the
project shall be disseminated among the stakeholders. The results of this study
shall be provided so that the research work contributes to the solutions or
developments.

2. Project Proceeding:

2.1. LIQUIDITY & LEVERAGE RATIO ANALYSES will be conducted for all
three listed companies to analyze the recent three years.

2.1.1. Liquidity Ratios

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 Liquidity ratios measure a firm’s ability to meet its current obligations.
 These include:
 Current Ratio
 Acid Test Ratio
 Sales to Working Capital
 Working capital

2.1.2. Leverage Ratios


 Leverage ratios measure the degree of protection of suppliers of long
term funds.
 Time Interest Earned
 Debt Ratio
 Debt / Equity Ratio
 Debt to Tangible Net worth Ratio
 Current Worth / Net worth Ratio
 Total Capitalization Ratio
 Long term Assets versus Long term Debt

3. Methodology:

3.1. Data Collection Sources: Data will be collected from secondary resources such
as various published financial reports, magazines, newspapers and etc. The
financial data of listed companies will be captured from their online website
resources.

 Fauji Fertilizer Limited:


The below link is contained all information about the
financial data of the organization.
http://www.ffc.com.pk/annual-report.aspx

 Engro Fertilizer Limited:


The below link is contained all information about the
financial data of the organization.
HTTP://ENGROFERTILIZERS.COM/DOWNLOADS/

 Fatima Fertilizer Limited:


The below link is contained all information about the
financial data of the organization.
http://fatima-group.com/ffcl/page.php/financial-results-
ffcl

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3.2. Date Collection Tools: The data shall be collected with use of below tools and
techniques to fulfill the requirements of project.

 Internet/Articles
 Magazines
 Books

3.3. Data Processing Tools:


Data shall be processed and analyse in following tools and softwares
 MS Word
 Excel and formulas

4. Interpretation:
5. Conclusion:
6. Recommendations:

7. Introduction of the student:


 Last Degree obtained B.Com 2011
 Alzamil Metal Work Factory/Abdullah Establishment.
 Assistant of Account
 4 years

8. Bibliography:
The below links are used for references.

Annual Report. (n.d.). Retrieved from Fauji Fertilizer Company Limited:


http://www.ffc.com.pk/annual-report.aspx

Annual Report. (n.d.). Retrieved from Engro Fertilizer Company Limited:


HTTP://ENGROFERTILIZERS.COM/DOWNLOADS/

Annual Report. (n.d.). Retrieved from Fatima Fertilizer Company Limited:


http://fatima-group.com/ffcl/page.php/financial-results-ffcl

MSG Expert. (n.d.). MSG Team Retrieved from


http://www.managementstudyguide.com/liquidity-ratios.htm

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