Financial Analysis

Comparative Financial Reporting Analysis
of
Crescent Textile Mills & Nishat Textile Mills
Submitted To:
MR. JAVED IQBAL
Submitted By:
Aqdas Imam Shah
MB2M-18-01
MBA (1.5) - (Morning)
Session: 2018-2020
INSTITUTE OF MANAGEMENT SCIENCES
1
NISHAT TEXTILE MILLS LIMITED
&
CRESCENT TEXTILE MILLS LIMITED
2
Acknowledgement
First and Foremost, I would like to thank Allah Almighty, the most benevolent and the most
merciful, without His Help, I could not have completed this project with success.
Most importantly, I would owe my gratitude to my Course Instructor Mr. Javed Iqbal who
guided me the whole way up here and made this assignment understandable to me. Without
his guidance and help, I was unable to understand a single word.
Last but not the least my parents and friends who supported and prayed for me the whole
semester. Without their moral support, this project was not easy at all.
3
Contents
Introduction to Nishat Textile Mills ....................................................................................... 5
Introduction to Crescent Textile Mills ................................................................................... 7
Balance Sheet of Crescent Textile Mills ................................................................................. 9
Balance Sheet of Nishat Textile Mills ................................................................................... 10
Income Statement of Crescent Textile Mills ........................................................................ 11
Income Statement of Nishat Textile Mills ............................................................................ 11
Vertical Analysis .................................................................................................................... 12
Balance Sheet of Nishat Textile Limited ............................................................................. 12
Balance Sheet of Crescent Textile Limited ......................................................................... 14
Income Statement of Nishat Textile Mills ........................................................................... 16
Income Statement of Crescent Textile Mills ........................................................................ 17
Comparative Analysis ............................................................................................................ 18
Horizontal Analysis (Fixed Base) ......................................................................................... 19
Nishat Textile Mills Balance Sheet...................................................................................... 19
Income Statement of Nishat Textile Mills ............................................................................ 21
Crescent Textile Mills (Fixed Base) .................................................................................... 22
Income Statement of Crescent Textile Mills (Fixed Base) .................................................. 24
Horizontal Analysis (Rotating Base) .................................................................................... 25
Balance Sheet of Nishat Textile Mills ................................................................................. 25
Balance Sheet of Crescent Textile Mills .............................................................................. 27
Income Statement of Nishat Textile Mills ........................................................................... 29
Income Statement of Crescent Textile Mills ....................................................................... 30
Comparative Analysis ............................................................................................................ 31
Balance Sheet Ratios .............................................................................................................. 32
Income Statement Ratios ....................................................................................................... 41
Activity Ratios ........................................................................................................................ 50
Cross over Ratios ................................................................................................................... 59
Per Share Ratios ..................................................................................................................... 61
Cash Flow Statement Ratios ................................................................................................. 68
Conclusion .............................................................................................................................. 72
4
Introduction to Nishat Textile Mills
The textile sector plays a crucial role in the economy of Pakistan contributing 8.5 in its GDP.
This sector is a major employment source for the large population of Pakistan by linking the
largest economic chain of country with exports and agriculture. Nishat textile mills is one of
the giant firms in the textile sector of the country. It came into being in 1951. In 1951, Nishat
Mills was founded by Mian Mohammad Yahya who started with a cotton export house which
grew into multiple branches like ginning, jute textile, insurance and chemicals. Luckily he
was made the chairman of All textile Mills Association and had a tremendous level of
success in a short time span. Currently it holds a huge market share in Pakistan’s textile
industry. It started as a partnership business but turned into a public limited company trading
shares at Karachi Stock Exchange. Current CEO of Nishat Mills is Mian Umar Mansha.
Nishat is a publicly owned company which holds a huge market share in Pakistan’s textile
industry. The vision of the firm is
“’to transform the Company into a modern and dynamic yarn, cloth and processed cloth and
finished product manufacturing Company that is fully equipped to play a meaningful role on
sustainable basis in the economy of Pakistan. To transform the Company into a modern and
dynamic power generating Company that is fully equipped to play a meaningful role on
sustainable basis in the economy of Pakistan.’’
It is one of the most modern, largest vertically integrated textile companies in Pakistan.
Nishat Mills Limited has 238,032 spindles, 794 Toyota air jet looms. The Company
comprises of the most modern textile dyeing and processing units, two stitching units for
home textile, two stitching units for garments and Power Generation facilities with a capacity
of 130 MW. The Company’s total export for the year 2018 was Rs. 38.862 billion (US$
353.03 million). Due to the application of efficient management policies, consolidation of
operations, a strong balance sheet and an effective marketing strategy, the growth trend is
expected to continue in the years to come. The Company’s production facilities comprise of
 spinning
 weaving
 processing
 stitching
 power generation.
The company is continuously focusing on providing quality products in the market with their
updated and modern machinery and technology. Nishat is being a pioneer in new markets by
producing specialized fabrics and designs. By providing quality and excellence to its
customers, it has expanded its customer base with the obsolescence of traditional ways of
doing business and production.
Nishat Mills is not just serving is customers inside the country but around the globe having
business relationships with international players like J.K.N International, Levis, Ocean
Garments, Tommy Bahammas, Laura Ashley, American living, Hugo Boss and John
5
Lewis.The firm has expanded into an export oriented organization which sends most of its
products to United States, Far East and Europe.
Nishat Linen is one of the famous brand of Nishat Mills, constituting home garments and
clothing etc. From bed linen to kitchen coordinates, upholstery to apparel, Nishat Linen has
become a household name as a creator of stunning, high-quality designs at reasonable prices;
a feat achieved by few.
Major competitors of Nishat Textile Mills are:
 Crescent Textile Mills

 Chenaab Textile Mills
 Arzoo Textile Mills
Board of Directors
Mian Umer Mansha Chief Executive Officer
Mian Hassan Mansha Chairman
Mr. Khalid Qadeer Qureshi Director
Mr. Ghazanfar Husain Mirza Director
Syed Zahid Hussain Director
Mr. Farid Noor Ali Fazal Director
Mr. Maqsood Ahmad Director
6
Introduction to Crescent Textile Mills
Being a Pakistan based company; Crescent Textile Mills was founded in 1950 having its
headquarters in Faisalabad, Punjab, Pakistan. It is a vertically integrated company that
manufactures textile products. It is dealing in supreme quality yarn, fabrics, textile and
garments. It has a broad customer base serving for more than 60 years now. The different
business segments of Crescent Textile Mills are:
 spinning
 weaving
 home textile processing
 power generation
 cold storage
The spinning segment remains engaged in producing yarn using natural as well as artificial
fibre, weaving segment includes producing greige fabric via yarn, home textile segment
includes processing greige fabric for the purpose of producing printed and dyed fabric, power
generation segment generates and distributes power facility and lastly, cold storage segment
includes making ice and warehousing perishable products of the company. Its textile
manufacturing unit consists of combing, bleaching, dying, printing, stitching, buying and
selling of yarn cloths and other goods. It has 240 air jet looms in its possession for production
of ring spun yarn and compact ring spun yarn.
Crescent Textile Mills is not just confined to the country borders but also expanded its
business to outside world having major exports hosted by North America, Europe and Japan.
Its vision is:
” To be the preferred choice of customers through innovative products and solutions and be
a leading contributor to the economy by enhancing value for stakeholders.”
Moreover, Crescent has number of social responsibility initiatives which prove its position as
a socially responsible organization. It is host to 5000 to 10000 employees with special
encouragement on female employment and no-child labour. Its CSR related activities include:
housing community service, state of art schooling system, philanthropy, welfare support to
needy families and the citizen foundation school.
Some of the major competitors of Crescent Textile Mills include:
 Nishat Mills Limited

 Kohinoor Industries Limited
 Sapphire Textile Mills Limited
7
Current Board of Directors of Crescent Textile Mills Limited
1 Mr. Muhammad Anwar Chief Executive Officer
2 Mr. Shaukat Shafi Chairman
3 Mr. Ahmed Shafi Director
4 Mr. Amjad Mehmood Director
5 Mr. Anjum Muhammad Saleem Director
6 Ms. Khalid Bashir Director
7 Mr. Khurram Mazhar Karim Director
8
Balance Sheet of Crescent Textile Mills
Balance Sheet
Crescent Textile Mills Limited
Account Title 2014 2015 2016 2017 2018
Property,Plant and Equipment 4,175,596,000 4,139,630,000 4,494,639,000 6,478,358,000 6,328,138,000
Intangible Asset 0 0 0 18,472,000 12,139,000
Investment in associate 310,723,000 337,793,000 0 0 0
Long term investments 2,539,744,000 2,541,381,000 3,449,038,000 5,166,546,000 3,736,188,000
Long term loans and advances 3,309,000 3,664,000 2,867,000 1,924,000 1,082,000
Long term deposits and prepayments 7,266,000 5,466,000 5,288,000 5,148,000 10,276,000
Deferred income tax asset 1,780,000 0 0 0 127,820,000
Stores,spare parts and loose tools 156,533,000 176,991,000 185,062,000 191,530,000 198,030,000
Stock in trade 1,489,590,000 1,337,524,000 1,635,911,000 2,029,134,000 2,588,958,000
Trade debts 2,248,287,000 2,566,707,000 2,365,485,000 2,236,170,000 2,346,338,000
Loans and advances 364,305,000 418,287,000 469,018,000 576,628,000 687,038,000
Short term deposits and prepayments 20,457,000 22,801,000 29,450,000 62,086,000 60,714,000
Accrued Interest 4,392,000 5,068,000 4,109,000 3,861,000 3,181,000
Other receivables 570,830,000 743,981,000 1,130,440,000 1,252,529,000 1,416,322,000
Short term investments 82,226,000 66,052,000 94,449,000 88,276,000 94,449,000
Cash and bank balances 6,935,000 5,195,000 9,297,000 3,895,000 3,413,000
Non current asset held for sale 0 84,318,000 0 0 0
Long term financing 79,166,000 99,994,000 445,371,000 1,063,253,000 845,071,000
Liabilities against assets subject to finance lease 43,793,000 11,059,000 0 0 0
Deferred income tax liability 0 32,241,000 58,026,000 261,000 0
Trade and other payables 1,025,519,000 1,191,175,000 916,264,000 1,108,670,000 1,488,144,000
Unclaimed dividend 0 0 8,749,000 9,634,000 9,513,000
Accrued markup 97,001,000 85,254,000 59,941,000 65,388,000 85,596,000
Short term borrowings 5,081,813,000 5,078,680,000 5,484,784,000 5,790,390,000 6,416,791,000
Current portion of non current liabilities 164,104,000 111,795,000 65,745,000 190,376,000 258,038,000
Provision for taxation 122,353,000 104,294,000 70,227,000 31,291,000 140,604,000
Contigencies and Commitments 0 0 0 0 0
Authorized Share Capital 100000000 ordinary shares of Rs.10 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000
Issued, subscribed and paid up share capital 492,099,000 615,124,000 800,000,000 800,000,000 800,000,000
Reserves 2,585,358,000 2,834,538,000 0 0 0
Capital reserves 0 0 0 0 0
Premium on issue of right shares 0 0 200,169,000 200,169,000 200,169,000
Fair value reserve 0 0 1,004,101,000 2,719,389,000 1,225,974,000
Surplus on revaluation of operating fixes assets-net of deferred income tax 2,290,767,000 2,290,704,000 2,214,012,000 3,575,108,000 3,567,516,000
Revenue reserves 0 0 2,547,664,000 2,560,628,000 2,576,670,000
Total Current Assets 4,943,555,000 5,426,924,000 5,923,221,000 6,444,109,000 7,398,443,000
Total Non-current Assets 7,038,418,000 7,027,934,000 7,951,832,000 11,670,448,000 10,215,643,000
Total Current Liabilities 6,490,790,000 6,571,198,000 6,605,710,000 7,195,749,000 8,398,686,000
Total Non-current Liabilities 122,959,000 143,294,000 503,397,000 1,063,514,000 845,071,000
Total Equity 5,368,224,000 5,740,366,000 6,765,946,000 9,855,294,000 8,370,329,000
No.of shares outstanding 49,209,923 61,512,404 80,000,000 80,000,000 80,000,000
Total Assets 11,981,973,000 12,454,858,000 13,875,053,000 18,114,557,000 17,614,086,000
Total Equity and Liabilities 11,981,973,000 12,454,858,000 13,875,053,000 18,114,557,000 17,614,086,000
9
Balance Sheet of Nishat Textile Mills
Nishat Textile Mills Limited

Balance Sheet
Account Title 2014 2015 2016 2017 2018
Property, Plant and Equipment 22,964,388,000 24,357,269,000 24,715,095,000 27,767,699,000 28,180,049,000
Investments in properties 386,748,000 479,242,000 472,765,000 466,935,000 464,896,000
Long term investments 44,771,715,000 51,960,454,000 55,399,080,000 60,008,322,000 44,757,279,000
Loan term loans 102,726,000 94,284,000 97,762,000 167,526,000 221,481,000
Long term deposits and prepayments 48,008,000 58,307,000 63,687,000 121,646,000 69,643,000
Stores, spare parts and loose tools 1,316,479,000 1,335,763,000 1,269,509,000 2,106,878,000 1,714,031,000
Stock-in-trade 12,752,495,000 10,350,193,000 9,933,736,000 12,722,712,000 12,243,652,000
Trade debts 2,929,054,000 3,014,466,000 2,253,369,000 2,245,620,000 4,029,789,000
Loans and advances 4,184,485,000 5,575,273,000 6,111,644,000 6,442,363,000 4,848,088,000
Short term deposits and prepayments 42,893,000 44,849,000 65,433,000 60,454,000 90,616,000
Other receivables 1,504,538,000 1,625,281,000 2,023,092,000 2,828,285,000 3,420,370,000
Accrued interest 15,172,000 2,540,000 13,662,000 11,917,000 9,792,000
Short term investments 3,227,560,000 2,189,860,000 2,065,217,000 2,535,973,000 2,581,520,000
Cash and bank balances 2,802,316,000 52,219,000 2,115,168,000 43,945,000 104,827,000
Longs Term Financing 6,431,304,000 5,582,220,000 4,629,456,000 5,245,629,000 5,190,839,000
Deferred income tax liability 474,878,000 247,462,000 261,567,000 783,292,000 571,833,000
Trade and other payables 4,428,996,000 4,858,315,000 5,737,896,000 5,762,119,000 6,416,602,000
Accrued mark-up 295,054,000 221,394,000 113,320,000 110,751,000 109,378,000
Short term borrowings 14,468,124,000 11,524,143,000 10,475,657,000 14,697,393,000 12,507,590,000
Current portion of non-current liabilities 1,595,652,000 1,783,250,000 1,980,768,000 2,093,024,000 2,144,900,000
Provision for taxation 765,393,000 780,393,000 1,245,400,000 0 0
Unclaimed Dividend 0 0 0 75,271,000 81,746,000
Contigencies and commitments 0 0 0 0 0
Authorized share capital 1,100,000,000 ordinary shares of Rupees 10 each 11,000,000,000 11,000,000,000 11,000,000,000 11,000,000,000 11,000,000,000
Issued, subscribed and paid up share capital 3,515,999,000 3,515,999,000 3,515,999,000 3,515,999,000 3,515,999,000
Reserves 65,073,177,000 72,626,824,000 78,639,156,000 85,246,797,000 72,197,146,000
Total current assets 28,774,992,000 24,190,444,000 25,850,830,000 28,998,147,000 29,042,685,000
Total non-current assets 68,273,585,000 76,949,556,000 80,748,389,000 88,532,128,000 73,693,348,000
Total current liabilities 21,553,219,000 19,167,495,000 19,553,041,000 22,738,558,000 21,260,216,000
Total non-current liabilities 6,906,182,000 5,829,682,000 4,891,023,000 6,028,921,000 5,762,672,000
Total Equity 68,589,176,000 76,142,823,000 82,155,155,000 88,762,796,000 75,713,145,000
No.of shares outstanding 351,599,848 351,599,848 351,599,848 351,599,848 351,599,848
Total Assets 97,048,577,000 101,140,000,000 106,599,219,000 117,530,275,000 102,736,033,000
Total Equity and Liabilities 97,048,577,000 101,140,000,000 106,599,219,000 117,530,275,000 102,736,033,000
10
Income Statement of Crescent Textile Mills
Profit or Loss Statement

Crescent Textile Mills
Account Title 2014 2015 2016 2017 2018
Sales 12,411,497,000 11,834,775,000 10,578,809,000 10,872,762,000 11,314,259,000
Cost of Sales -11,036,060,000 -10,321,726,000 -9,238,638,000 -9,900,768,000 -10,214,002,000
Gross Profit 1,375,437,000 1,513,049,000 1,340,171,000 971,994,000 1,100,257,000
Distribution cost -610,760,000 -648,384,000 -633,356,000 -643,674,000 -468,190,000
Administrative expenses -195,553,000 -233,786,000 -283,063,000 -299,804,000 -294,791,000
Other expenses -66,587,000 -62,825,000 -26,396,000 -10,169,000 -14,244,000
502,537,000 568,054,000 397,356,000 18,347,000 323,032,000
Other income 360,727,000 193,312,000 376,305,000 349,609,000 324,846,000
Profit from Operations 863,264,000 761,366,000 773,661,000 367,956,000 647,878,000
Finance cost -472,319,000 -428,514,000 -360,006,000 -286,816,000 -637,703,000
Share of profit / (loss) from associate -47,521,000 27,070,000 59,520,000 0 0
Reversal of carrying amount of investment in associate 0 0 -126,500,000 0 0
Profit / (loss) Before Taxation 343,424,000 359,922,000 346,675,000 81,140,000 10,175,000
Taxtation -104,405,000 -138,228,000 -96,132,000 32,199,000 -1,720,000
Profit / (loss) After Taxation 239,019,000 221,694,000 250,543,000 113,339,000 8,455,000
Income Statement of Nishat Textile Mills
Profit or Loss Statement

Nishat Textile Mills
2014 2015 2016 2017 2018
Sales 54,444,091,000 51,177,577,000 47,999,179,000 49,247,657,000 53,729,124,000
Cost of Sales -46,580,317,000 -45,153,439,000 -41,759,788,000 -43,867,819,000 -48,178,678,000
Gross Profit 7,863,774,000 6,024,138,000 6,239,391,000 5,379,838,000 5,550,446,000
Distribution cost -2,554,627,000 -2,426,295,000 -2,137,894,000 -2,367,862,000 -2,438,118,000
Administrative expenses -1,032,238,000 -1,101,658,000 -1,092,406,000 -1,128,721,000 -1,074,286,000
Other expenses -344,516,000 -366,142,000 -316,886,000 -207,507,000 -189,730,000
3,932,393,000 2,130,043,000 2,692,205,000 1,675,748,000 1,848,312,000
Other income 3,653,041,000 4,004,655,000 4,079,054,000 4,259,666,000 4,102,639,000
Profit from Operations 7,585,434,000 6,134,698,000 6,771,259,000 5,935,414,000 5,950,951,000
Finance cost -1,609,882,000 -1,744,773,000 -1,046,221,000 -915,072,000 -993,824,000
Profit / (loss) Before Taxation 5,975,552,000 4,389,925,000 5,725,038,000 5,020,342,000 4,957,127,000
Taxtation -463,000,000 -478,000,000 -802,000,000 -758,000,000 -860,000,000
Profit / (loss) After Taxation 5,512,552,000 3,911,925,000 4,923,038,000 4,262,342,000 4,097,127,000
11
Vertical Analysis
Balance Sheet of Nishat Textile Limited

Balance Sheet (Vertical Analysis)
Account Title 2014 2015 2016 2017 2018
Property, Plant and Equipment 23.66% 24.08% 23.19% 23.63% 27.43%
Investments in properties 0.40% 0.47% 0.44% 0.40% 0.45%
Long term investments 46.13% 51.37% 51.97% 51.06% 43.57%
Loan term loans 0.11% 0.09% 0.09% 0.14% 0.22%
Long term deposits and prepayments 0.05% 0.06% 0.06% 0.10% 0.07%
Stores, spare parts and loose tools 1.36% 1.32% 1.19% 1.79% 1.67%
Stock-in-trade 13.14% 10.23% 9.32% 10.83% 11.92%
Trade debts 3.02% 2.98% 2.11% 1.91% 3.92%
Loans and advances 4.31% 5.51% 5.73% 5.48% 4.72%
Short term deposits and prepayments 0.04% 0.04% 0.06% 0.05% 0.09%
Other receivables 1.55% 1.61% 1.90% 2.41% 3.33%
Accrued interest 0.02% 0.00% 0.01% 0.01% 0.01%
Short term investments 3.33% 2.17% 1.94% 2.16% 2.51%
Cash and bank balances 2.89% 0.05% 1.98% 0.04% 0.10%
Longs Term Financing 6.63% 5.52% 4.34% 4.46% 5.05%
Deferred income tax liability 0.49% 0.24% 0.25% 0.67% 0.56%
Trade and other payables 4.56% 4.80% 5.38% 4.90% 6.25%
Accrued mark-up 0.30% 0.22% 0.11% 0.09% 0.11%
Short term borrowings 14.91% 11.39% 9.83% 12.51% 12.17%
Current portion of non-current liabilities 1.64% 1.76% 1.86% 1.78% 2.09%
Provision for taxation 0.79% 0.77% 1.17% 0.00% 0.00%
Unclaimed Dividend 0.00% 0.00% 0.00% 0.06% 0.08%
Contigencies and commitments 0.00% 0.00% 0.00% 0.00% 0.00%
Authorized share capital 1,100,000,000 ordinary shares of Rupees 10 each 11.33% 10.88% 10.32% 9.36% 10.71%
Issued, subscribed and paid up share capital 3.62% 3.48% 3.30% 2.99% 3.42%
Reserves 67.05% 71.81% 73.77% 72.53% 70.27%
Total current assets 29.65% 23.92% 24.25% 24.67% 28.27%
Total non-current assets 70.35% 76.08% 75.75% 75.33% 71.73%
Total current liabilities 22.21% 18.95% 18.34% 19.35% 20.69%
Total non-current liabilities 7.12% 5.76% 4.59% 5.13% 5.61%
Total Equity 70.68% 75.28% 77.07% 75.52% 73.70%
No.of shares outstanding 0.36% 0.35% 0.33% 0.30% 0.34%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00%
Total Equity and Liabilities 100.00% 100.00% 100.00% 100.00% 100.00%
12
Interpretation
By observing equity and liabilities section of the given balance sheet, we came to know that
in 2014, firm has focused on equity financing as compared to debt financing; having a low
percentage of liabilities in relation to equity portion. Moreover, current liabilities have a
major contribution than non-current liabilities. The firm is keeping up the same trend in 2015
and 2016 having more equity financing than the debt. But in 2017, firm has changed its
capital structure by reducing approximately 2% of its equity financing and contributing an
increase of approximately 2% to the debt financing, both current and non-current liabilities.
In 2018, Nishat textile is keeping up the trend of capital structure like the previous year with
decreasing equity financing and increasing debt financing.
Furthermore, Asset section of the balance sheet also experienced major changes throughout
five years. In 2014, non-current assets are the major bearer of the asset section having long
term investments the most contribution whereas in current assets, stock in trade has the
highest input throughout the balance sheet. In 2015, firm has kept the trend of increasing non-
current assets and decreasing current assets. But in 2016 firm took a reverse move and it
decreased its non-current assets investment by small percentage mainly; plant and equipment
and increased the current assets investment primarily the resources were diverted to cash and
bank balance. 2017 also saw decrease in non-current assets and then diversion of those
resources to current assets, especially stock in trade saw an increased investment of funds.
Finally in 2018, firm has decreased its non-current assets by lowering its long term
investments with a huge percentage.
To sum up, in these 5 years firm was observed to be chiefly focused on equity in its capital
structure rather than debt, as its equity throughout these five years has always remained more
than the debts. And short-term borrowings were reduced, and the trade and other payables
were increased by slight percentages in this five years period of analysis, showing changes in
the preferences of the firm over the time period. Moreover, on the other side of balance sheet
cash was mainly withdrawn from stores and spares and cash was injected in property, plant
and equipment, showing the firms high preferences towards non- current assets investment.
13
Balance Sheet of Crescent Textile Limited

Balance Sheet (Vertical Analysis)
Account Title 2014 2015 2016 2017 2018
Property,Plant and Equipment 34.85% 33.24% 32.39% 35.76% 35.93%
Intangible Asset 0.00% 0.00% 0.00% 0.10% 0.07%
Investment in associate 2.59% 2.71% 0.00% 0.00% 0.00%
Long term investments 21.20% 20.40% 24.86% 28.52% 21.21%
Long term loans and advances 0.03% 0.03% 0.02% 0.01% 0.01%
Long term deposits and prepayments 0.06% 0.04% 0.04% 0.03% 0.06%
Deferred income tax asset 0.01% 0.00% 0.00% 0.00% 0.73%
Stores,spare parts and loose tools 1.31% 1.42% 1.33% 1.06% 1.12%
Stock in trade 12.43% 10.74% 11.79% 11.20% 14.70%
Trade debts 18.76% 20.61% 17.05% 12.34% 13.32%
Loans and advances 3.04% 3.36% 3.38% 3.18% 3.90%
Short term deposits and prepayments 0.17% 0.18% 0.21% 0.34% 0.34%
Accrued Interest 0.04% 0.04% 0.03% 0.02% 0.02%
Other receivables 4.76% 5.97% 8.15% 6.91% 8.04%
Short term investments 0.69% 0.53% 0.68% 0.49% 0.54%
Cash and bank balances 0.06% 0.04% 0.07% 0.02% 0.02%
Non current asset held for sale 0.00% 0.00% 0.00% 0.00% 0.00%
Long term financing 0.66% 0.80% 3.21% 5.87% 4.80%
Liabilities against assets subject to finance lease 0.37% 0.09% 0.00% 0.00% 0.00%
Deferred income tax liability 0.00% 0.26% 0.42% 0.00% 0.00%
Trade and other payables 8.56% 9.56% 6.60% 6.12% 8.45%
Unclaimed dividend 0.00% 0.00% 0.06% 0.05% 0.05%
Accrued markup 0.81% 0.68% 0.43% 0.36% 0.49%
Short term borrowings 42.41% 40.78% 39.53% 31.97% 36.43%
Current portion of non current liabilities 1.37% 0.90% 0.47% 1.05% 1.46%
Provision for taxation 1.02% 0.84% 0.51% 0.17% 0.80%
Contigencies and Commitments 0.00% 0.00% 0.00% 0.00% 0.00%
Authorized Share Capital 100000000 ordinary shares of Rs.10 8.35% 8.03% 7.21% 5.52% 5.68%
Issued, subscribed and paid up share capital 4.11% 4.94% 5.77% 4.42% 4.54%
Reserves 21.58% 22.76% 0.00% 0.00% 0.00%
Capital reserves 0.00% 0.00% 0.00% 0.00% 0.00%
Premium on issue of right shares 0.00% 0.00% 1.44% 1.11% 1.14%
Fair value reserve 0.00% 0.00% 7.24% 15.01% 6.96%
Surplus on revaluation of operating fixes assets-net of deferred income tax 19.12% 18.39% 15.96% 19.74% 20.25%
Revenue reserves 0.00% 0.00% 18.36% 14.14% 14.63%
Total Current Assets 41.26% 42.90% 42.69% 35.57% 42.00%
Total Non-current Assets 58.74% 56.43% 57.31% 64.43% 58.00%
Total Current Liabilities 54.17% 52.76% 47.61% 39.72% 47.68%
Total Non-current Liabilities 1.03% 1.15% 3.63% 5.87% 4.80%
Total Equity 44.80% 46.09% 48.76% 54.41% 47.52%
No.of shares outstanding 0.41% 0.49% 0.58% 0.44% 0.45%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00%
Total Equity and Liabilities 100.00% 100.00% 100.00% 100.00% 100.00%
14
Interpretation
First and foremost, the equity and liability section of the firm reflects that in 2014, firm was
chiefly focused on financing its assets mainly with liabilities; especially current liabilities
were the major source of financing for the firm. In current liabilities short-term borrowings
were bearing the highest weightage. In 2015, firm has somewhat modified its capital structure
by reducing the debt and increasing the equity portion. Here short-term borrowings were
reduced by 2% and this 2% was then covered by equity source. 2016 again followed the same
trend as observed in previous year by equity increased by 2% and current liabilities decreased
by same percentage. 2017 observed major changes by equity having more weightage in
capital structure, here firm has reduced its current liabilities especially short-term borrowings
by 8% while non-current liabilities primarily long-term financing were increased, and equity
section also increased by 5%. Finally, in 2018 again company’s debt financing has taken
hype with an increase in short term borrowings and has more weightage in capital structure
than equity financing.
In assets section, non- current assets were occupying the major part of funds being invested in
them, where property, plant and equipment and long-term investment were holding a largest
part in 2014 and in current assets trade debts was the major account in current assets. In 2015,
the trend somewhat changed, and firm begin to withdraw funds from non-current assets and
then hold those in current assets where non- current assets saw decline of 2%, main decrease
were seen in property, plant and equipment and long-term investments, and current assets
saw downward shift of 1%. On the contrary to this, in 2016 firm has increased its funds in
non-current assets and decreased the current assets, trade debts and long-term investments
were the major accounts effected from this decision, trade debts declined by 3% and long-
term investment increased by 4%.Again 2017 showed the same trends, where current assets
were reduced by 7% and non-current assets increased by 7%, in current assets trade debts and
other receivables were major decreasing accounts and in non-current assets long-term
investment and property, plant and equipment increased by 4% and 3% respectively. Finally,
in 2018 firm has reversed the trend again and observed huge reduction of 6% in investment of
non-current assets with a considerable decrease of 6% in long term investments and increase
in current assets with an increase in stock in trade, trade debts and receivables.
Based on the above discussion, firm has followed the mixed trend of using debt or equity
financing in the capital structure of liabilities and equity portion. Whereas in asset portion,
firm has again gone through the mixed trend of diverting funds from non-current to current
assets and vice-versa.
15

Income Statement (VA)
Account Title 2014 2015 2016 2017 2018
Sales 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of Sales -85.56% -88.23% -87.00% -89.08% -89.67%
Gross Profit 14.44% 11.77% 13.00% 10.92% 10.33%
Distribution cost -4.69% -4.74% -4.45% -4.81% -4.54%
Administrative expenses -1.90% -2.15% -2.28% -2.29% -2.00%
Other expenses -0.63% -0.72% -0.66% -0.42% -0.35%
7.22% 4.16% 5.61% 3.40% 3.44%
Other income 6.71% 7.83% 8.50% 8.65% 7.64%
Profit from Operations 13.93% 11.99% 14.11% 12.05% 11.08%
Finance cost -2.96% -3.41% -2.18% -1.86% -1.85%
Profit / (loss) Before Taxation 10.98% 8.58% 11.93% 10.19% 9.23%
Taxtation -0.85% -0.93% -1.67% -1.54% -1.60%
Profit / (loss) After Taxation 10.13% 7.64% 10.26% 8.65% 7.63%
Interpretation
Nishat Textile mill was profitable in 2014. Cost of sales and distribution cost are the major
grinds on sales but still profit was handsome. In 2015, profit has declined due to increase in
cost of sales, distribution cost, administrative expenses and other expenses. Finance cost has
also increased as compared to the last year. Taxation also increased and profits of the firm
decreased by 3% approximately.
2016 was a prosperous year as cost of sales, finance costs and distribution costs were
controlled with efficient managerial skills. Cost of sales shrunk by 1% resultantly, gross
profit increasing. Other income also increased in 2016. These all factors jointly enabled the
firm to record 3% increase in profits as compared to previous year. 2017 was again a year of
low profits, because cost of sales increased along with increase in distribution cost. Though
other income slightly increased but still net profit bared 2% decrease. Lastly, profit again
declined in 2018 accompanied by highest cost of sales.
Overall Nishat has gone through varying trends in profits and expenses throughout 5 years.
16

Income Statement (Vertical Analysis)
Account Title 2014 2015 2016 2017 2018
Sales 100.0000% 100.0000% 100.0000% 100.0000% 100.0000%
Cost of Sales -88.9180% -87.2152% -87.3316% -91.0603% -90.2755%
Gross Profit 11.0820% 12.7848% 12.6684% 8.9397% 9.7245%
Distribution cost -4.9209% -5.4786% -5.9870% -5.9201% -4.1381%
Administrative expenses -1.5756% -1.9754% -2.6758% -2.7574% -2.6055%
Other expenses -0.5365% -0.5309% -0.2495% -0.0935% -0.1259%
4.0490% 4.7999% 3.7562% 0.1687% 2.8551%
Other income 2.9064% 1.6334% 3.5572% 3.2155% 2.8711%
Profit from Operations 6.9554% 6.4333% 7.3133% 3.3842% 5.7262%
Finance cost -3.8055% -3.6208% -3.4031% -2.6379% -5.6363%
Share of profit / (loss) from associate -0.3829% 0.2287% 0.5626% 0.0000% 0.0000%
Reversal of carrying amount of investment in associate 0.0000% 0.0000% -1.1958% 0.0000% 0.0000%
Profit / (loss) Before Taxation 2.7670% 3.0412% 3.2771% 0.7463% 0.0899%
Taxation -0.8412% -1.1680% -0.9087% 0.2961% -0.0152%
Profit / (loss) After Taxation 1.9258% 1.8732% 2.3683% 1.0424% 0.0747%
Interpretation
Crescent textile mills have gone through varying trends in net income throughout the last
year. In 2014, firm has to bear considerable cost of sales and distribution costs. 2015 has seen
somewhat decrease in cost of sales which led to increase in gross profit. But distribution cost
has taken a surge in this year accompanied by increase in taxes which led to the decrease in
profit of 2015.
In 2016, profit is increased. Although there is an increase in cost of sales and distribution cost
but decrease in taxes and increase in other income is attributed to an increase in net income.
2017 again experiences the reverse trend with decrease in net income; cost of sales has taken
a considerable hype and ended up with decreased net income. Lastly, income of 2018 is the
least with the highest finance cost in all 5 years and lower cost of sales as compared to 2017.
Summing up the income statement of Crescent Textile Mills, firm has borne high cost of
sales which led to the inconsistency of profits. Finance cost and distribution cost played an
equal part in causing fluctuations in company’s income.
17
Comparative Analysis
If we compare the balance sheet trends of both firms, we may come to know that both firms
in these five years focused on continuously reducing their debt portion in their capital
structure and increasing the dependence on equity sources of finance. Nishat comparatively
was having a more portion of its assets financed through equity sources. Short term
borrowings were the major source of debt in balance sheet of the both firms. However, Nishat
was having less dependence on debt as compared to Crescent. Crescent was holding twice the
debts of Nishat in its balance sheet. In terms of assets both firms have shown opposite trends.
From 2014, 2015 Nishat has focused on reducing its current assets investment and increasing
the non-current assets investment while crescent has remained exactly opposite to this where
it focused on increasing the current assets investment in 2014, 2015. In 2016 Nishat has
reduced its non-current assets and rose current ones and Crescent mills did opposite to it by
reducing current assets and increasing non-current ones. 2017 has also shown the same trend
as in 2016, where Nishat has reduced non-current assets by 1% and increased current assets
by 1% and contrary to this, Crescent have increased its non-current assets investment by 7%
and declining current assets by 7%. Finally, in 2018 both firms increased their current assets
and decreased non-current assets.
In profit and loss statement comparative analysis, Nishat was more profitable as compared to
Crescent. Cost of sales of both firms tended to rose during almost all years which may be
attributed to high raw material costs due to external market factors but Nishat is having a
lower cost as compared to Crescent. Gross profits of Crescent are highest in 2015 whereas
Nishat’s highest gross profit is recorded in 2016. Overall GP is decreasing in almost all years.
Other incomes of both firms were almost showed increases over the years and finance costs
of both firms is showing mixed trend . Finally, in terms of profits Nishat mills comparatively
stood more profitable, but its profits tended to decline over the years and Crescent mills
observed varying trends by sometimes it rose and sometimes it reduced. However, as a whole
2016 was a very productive year for both, profits of both firms witnessed very high growth in
this year.
To sum up, Nishat comparatively was more inclined towards increasing the equity in its
capital structure and opposite was the case with Crescent. In terms of distribution of funds
among assets both were having a major part of their resources invested in non-current assets
as compared to current assets. In profit and loss statement analysis one may conclude that
Nishat was comparatively more profitable despite of reduction in profits over the time.
18
Horizontal Analysis (Fixed Base)
Nishat Textile Mills Balance Sheet

Horizontal Analysis with Fixed Base
Account Title 2014-15 2014-16 2014-17 2014-18
Property, Plant and Equipment 6.07% 7.62% 20.92% 22.71%
Investments in properties 23.92% 22.24% 20.73% 20.21%
Long term investments 16.06% 23.74% 34.03% -0.03%
Loan term loans -8.22% -4.83% 63.08% 115.60%
Long term deposits and prepayments 21.45% 32.66% 153.39% 45.07%
Stores, spare parts and loose tools 1.46% -3.57% 60.04% 30.20%
Stock-in-trade -18.84% -22.10% -0.23% -3.99%
Trade debts 2.92% -23.07% -23.33% 37.58%
Loans and advances 33.24% 46.05% 53.96% 15.86%
Short term deposits and prepayments 4.56% 52.55% 40.94% 111.26%
Other receivables 8.03% 34.47% 87.98% 127.34%
Accrued interest -83.26% -9.95% -21.45% -35.46%
Short term investments -32.15% -36.01% -21.43% -20.02%
Cash and bank balances -98.14% -24.52% -98.43% -96.26%
Longs Term Financing -13.20% -28.02% -18.44% -19.29%
Deferred income tax liability -47.89% -44.92% 64.95% 20.42%
Trade and other payables 9.69% 29.55% 30.10% 44.88%
Accrued mark-up -24.96% -61.59% -62.46% -62.93%
Short term borrowings -20.35% -27.59% 1.58% -13.55%
Current portion of non-current liabilities 11.76% 24.14% 31.17% 34.42%
Provision for taxation 1.96% 62.71% -100.00% -100.00%
Unclaimed Dividend 0.00% 0.00% 1.00% 1.00%
Contigencies and commitments 0.00% 0.00% 0.00% 0.00%
Authorized share capital 1,100,000,000 ordinary shares of Rupees 10 each 0.00% 0.00% 0.00% 0.00%
Issued, subscribed and paid up share capital 0.00% 0.00% 0.00% 0.00%
Reserves 11.61% 20.85% 31.00% 10.95%
Total current assets -15.93% -10.16% 0.78% 0.93%
Total non-current assets 12.71% 18.27% 29.67% 7.94%
Total current liabilities -11.07% -9.28% 5.50% -1.36%
Total non-current liabilities -15.59% -29.18% -12.70% -16.56%
Total Equity 11.01% 19.78% 29.41% 10.39%
No.of shares outstanding 0.00% 0.00% 0.00% 0.00%
Total Assets 4.22% 9.84% 21.10% 5.86%
Total Equity and Liabilities 4.22% 9.84% 21.10% 5.86%
19
Interpretation
For this analysis 2014 is the base year. Now if we carefully analyse the equity section of
balance sheet, it is increasing since 2014 with more or less proportion which means Nishat
textile mills is leaning towards equity financing since 2014 shows a good sign as company is
more relying on internal sources of finance as compared to external sources which brings a
burden of obligations for the debtor.
Total liabilities of company are decreasing every year which is also a good indicator for the
investors. Total current liabilities are decreasing except for the year 2017 due to increased in
short term borrowings, unclaimed dividends. Total non-current liabilities is also decreased
with decrease in long term financing in all years. Deferred income tax liability is decreased in
first two years as compared to 2014 and increased in 2017 and 2018.
Now if we talk about asset portion of nishat textile mills, its total assets have been increased
in all years in comparison with year 2014. The highest increase is recorded in 2017 due to
considerable increase in non-current assets. In 2017, property plant and equipment, Long
term investments, long term loans, long term deposits and prepayments, investment in
properties are increasing with a considerable percentage aiding to increase in non-current
assets.
Current assets of Nishat Textile Mills is decreased in first two years with reference to 2014,
but then started increasing at the rate of 0.78% in 2017 and 0.93% in 2018. Stores, Spare
parts and and loose tools ,loans and advances, other receivables and deferred income tax
liabilties are the major changers in 2017 contributing to increase in current assets of that year
whereas trade debts, short term deposits and other receivables are the major contributors
towards increase in current assets of Nishat textile mills in 2018.
To summarize, Nishat textile mills is more inclined towards equity financing as compared to
debt financing which is a good indicator for the investors because it shows strong financial
position of the company. Moreover, Assets have also increased with reference to 2014 which
means company is growing ever since and also has positive growth prospects in future.
20
Horizontal Analysis with fixed base
Account Ti tl e 2014-15 2014-16 2014-17 2014-18
Sal es -6.00% -11.84% -9.54% -1.31%
Cost of Sal es -3.06% -10.35% -5.82% 3.43%
Gross Profit -23.39% -20.66% -31.59% -29.42%
Di stri buti on cost -5.02% -16.31% -7.31% -4.56%
Admi ni strati ve expenses 6.73% 5.83% 9.35% 4.07%
Other expenses 6.28% -8.02% -39.77% -44.93%
-45.83% -31.54% -57.39% -53.00%
Other i ncome 9.63% 11.66% 16.61% 12.31%
Profit from Operations -19.13% -10.73% -21.75% -21.55%
Fi nance cost 8.38% -35.01% -43.16% -38.27%
Profit / (loss) Before Taxation -26.54% -4.19% -15.99% -17.04%
Taxtati on 3.24% 73.22% 63.71% 85.75%
Profit / (loss) After Taxation -29.04% -10.69% -22.68% -25.68%
Interpretation
2014 is considered as a base year for Nishat textile mills. Time value of money is not
considered in this analysis. In 2015 sales are decreased by 6% so is cost of sales which leads
to decrease in gross profit as well. Overall finance cost and taxation is increased and net
income is decreased by 29.04%. 2016 is the boom of textile industry in which government
announced incentives for textile industry like decrease in finance cost and cost of raw
material also decreased but in comparison with 2014, these figures were still high so it led to
decrease in net income.
In 2017 sales is decreased as well as cost of sales which led to decrease in gross profit.
Although expenses decreased but taxation got high which took the firm back to decrease in
net income as compared to 2014. 2018 exhibits the increase in cost of sales and taxation also
increased to a great extend which lead to decrease in net income by 25.68%.
21
Crescent Textile Mills (Fixed Base)
22
Interpretation
If we carefully analyse Equity portion of Crescent Textile’s balance sheet, there is an increase
of 6.93% in 2015 due to increase in issued capital and reserves which means firm is leaning
more towards equity financing in capital structure which is a good sign as it doesn’t have to
bear the burden of obligations attached with external financing. In 2016, 17,18 the trend
remains the same and exhibits increased inclination towards equity financing than debt
financing.
Total non-current liabilities is subject to increase with considerable percentages due to

increase in ng term financing every year. Total current liabilities are increasing in every year
compared to 2014 due to increase in trade and other payables and short term borrowings
which means company has to rely on external short term liabilities to meet its short term
needs. Overall total liabilities have been fallen since 2014 with a considerable proportion and
equity has been increased ever since.
Now, if we look on to the assets section of balance sheet, we can see it is increasing since
2014 accompnied with increase in current assets and non-current assets slightly decreased.
Regarding non-current assets, In 2015, long term loans and advances and investments in
associate is increasing whereas there is a considerable decrease in long term deposits and
prepayments and deferred income tax assets. in 2015,2016,2017 property, plant and
equipment is increasing whereas investment in associates, long term prepayments, long term
loans and advances and deferred income tax assets is decreasing. But long term investments
is increasing in all three years. 2018 experiences increases in long term prepayments and
deferred income tax assets, long term investments, property plant and equipment and
intangible assets as well.
Current assets also showing increasing trend since 2014. Other receivables, short term
deposits, store spare parts and losse tools, short term deposits and prepayments are increasing
in all years. Cash and bank balances are showing decreasing trend except year 2016. This
increase can be attributed to boom period of the industry introducing so many textile industry
friendly schemes to decrease cost of doing business.
To summarize, total assets as well as equity is increasing since 2014 which represents
company’s strong financial position. Liabilities are decreasing which means company is less
relying on external sources of finance and more inclined towards internal financing source
keeping it saved from all the obliagations attached with external sources of finance.
23
Income Statement of Crescent Textile Mills (Fixed Base)

HorizontaL Analysis with fixed base
Account Title 2014-15 2014-16 2014-17 2014-18
Sales -4.65% -14.77% -12.40% -8.84%
Cost of Sales -6.47% -16.29% -10.29% -7.45%
Gross Profit 10.00% -2.56% -29.33% -20.01%
Distribution cost -147.14% -146.05% -146.80% -134.04%
Administrative expenses 19.55% 44.75% 53.31% 50.75%
Other expenses -5.65% -60.36% -84.73% -78.61%
13.04% -20.93% -96.35% -35.72%
Other income -46.41% 4.32% -3.08% -9.95%
Profit from Operations -11.80% -10.38% -57.38% -24.95%
Finance cost -9.27% -23.78% -39.27% 35.02%
Share of profit / (loss) from associate -156.96% -225.25% -100.00% -100.00%
Reversal of carrying amount of investment in associate 0.00% 1.00% 0.00% 0.00%
Profit / (loss) Before Taxation 4.80% 0.95% -76.37% -97.04%
Taxtation 32.40% -7.92% -130.84% -98.35%
Profit / (loss) After Taxation -7.25% 4.82% -52.58% -96.46%
Interpretation
2014 is considered as a base year for this horizontal analysis. Time value of money is ignored
in this analysis. In 2015, sales are decreased by 4.65% and cost of sales is also less which
lead to fall of gross profit. FIinance cost is low and taxes are higher than 2014 which overall
led towards decrease in net income. 2016 is considered as the industry boom where cost of
sales are decreased by considerable amount. Other income is increased, finance cost is lower
and taxes are also low which led to increase of 4.82% in net income.
2017 also shows decrease in net income accompanied with decrease in exports which shows
less sales and administrative expenses are higher because minimum wage criteria was
increased by the government, cost of doing business took a boom. finance cost is low because
firm went for less external financing and more internal financing which overall led to 52%
decrease in net income. Year 2018 experiences 96.46% decrease in net income. finance cost
is increased by 35.02% which has lower net income by 96.46%
24
Horizontal Analysis (Rotating Base)
Balance Sheet of Nishat Textile Mills

Horizontal Analysis of Balance Sheet with Rotating Base
Account Title 2014-15 2015-16 2016-17 2017-18 2014-18 2019
Property, Plant and Equipment 6.07% 1.47% 12.35% 1.48% 5.34% 29,685,613,183.08
Investments in properties 23.92% -1.35% -1.23% -0.44% 5.22% 489,180,393.40
Long term investments 16.06% 6.62% 8.32% -25.41% 1.39% 45,381,575,298.41
Loan term loans -8.22% 3.69% 71.36% 32.21% 24.76% 276,319,074.66
Long term deposits and prepayments 21.45% 9.23% 91.01% -42.75% 19.73% 83,386,394.45
Stores, spare parts and loose tools 1.46% -4.96% 65.96% -18.65% 10.95% 1,901,798,565.21
Stock-in-trade -18.84% -4.02% 28.08% -3.77% 0.36% 12,287,999,953.43
Trade debts 2.92% -25.25% -0.34% 79.45% 14.19% 4,601,767,710.72
Loans and advances 33.24% 9.62% 5.41% -24.75% 5.88% 5,133,178,147.58
Short term deposits and prepayments 4.56% 45.90% -7.61% 49.89% 23.18% 111,625,225.40
Other receivables 8.03% 24.48% 39.80% 20.93% 23.31% 4,217,626,047.11
Accrued interest -83.26% 437.87% -12.77% -17.83% 81.00% 17,723,790.71
Short term investments -32.15% -5.69% 22.79% 1.80% -3.31% 2,495,990,978.07
Cash and bank balances -98.14% 3950.57% -97.92% 138.54% 973.26% 1,125,069,935.76
Longs Term Financing -13.20% -17.07% 13.31% -1.04% -4.50% 4,957,188,340.28
Deferred income tax liability -47.89% 5.70% 199.46% -27.00% 32.57% 758,072,782.90
Trade and other payables 9.69% 18.10% 0.42% 11.36% 9.89% 7,051,501,571.35
Accrued mark-up -24.96% -48.82% -2.27% -1.24% -19.32% 88,244,282.15
Short term borrowings -20.35% -9.10% 40.30% -14.90% -1.01% 12,381,105,798.35
Current portion of non-current liabilities 11.76% 11.08% 5.67% 2.48% 7.74% 2,311,016,785.08
Provision for taxation 1.96% 59.59% -100.00% 0.00% -9.61% -
Unclaimed Dividend 0.00% 0.00% 1.00% 8.60% 2.40% 83,708,363.93
Contigencies and commitments 0.00% 0.00% 0.00% 0.00% 0.00% -
Authorized share capital 1,100,000,000 ordinary shares of Rupees 10 each 0.00% 0.00% 0.00% 0.00% 0.00% 11,000,000,000.00
Issued, subscribed and paid up share capital 0.00% 0.00% 0.00% 0.00% 0.00% 3,515,999,000.00
Reserves 11.61% 8.28% 8.40% -15.31% 3.25% 74,540,072,616.80
Total current assets -15.93% 6.86% 12.17% 0.15% 0.81% 31,892,780,353.99
Total non-current assets 12.71% 4.94% 9.64% -16.76% 2.63% 75,916,074,344.01
Total current liabilities -11.07% 2.01% 16.29% -6.50% 0.18% 21,915,576,800.86
Total non-current liabilities -15.59% -16.10% 23.27% -4.42% -3.21% 5,715,261,123.19
Total Equity 11.01% 7.90% 8.04% -14.70% 3.06% 78,056,071,616.80
No.of shares outstanding 0.00% 0.00% 0.00% 0.00% 0.00% 351,599,848.00
Total Assets 4.22% 5.40% 10.25% -12.59% 1.82% 107,808,854,697.99
Total Equity and Liabilities 4.22% 5.40% 10.25% -12.59% 1.82% 105,686,909,540.85 2,121,945,157.14
25
Interpretation
Nishat mills have preferred equity financing over debt financing in all 5 years. Reserves are
increasing with an average of 3.25% throughout the equity section of Nishat Mills. Given this
trend forecasting of next year 2019 is also given which also shows increase in reserves.
Equity financing is increasing with an average of 3.06 % every year which is also a good sign
as firm doesn’t have to bear the pressure of obligations like interest attached with debt
financing. This growth in equity section is a good sign for future growth and profitability of
Nishat Mills Limited.
Current liabilities is showing a mixed trend in which first it is decreasing then in next two
years it is increasing and in last year again decreasing whereas non-current liabilities kept on
diminishing except year 2017 which shows less dependency on external financing sources
making it a good sign for the firm as firm wouldn’t have to meet the obligations attached with
debt financing. The diminishing trend in liabilities has uplifted the equity section of the
company making a good combination of equity and liabilities. Equity and liabilities section
grew except last year with different proportions with the highest growth seen in year 2017. It
shows that firm was having growth in its balance sheet over the years due to expansion of its
business, which was forcing it to search for more external sources of finance because profit
was not satisfying the expanding growth needs of finances. So, this may impose a little risk
on the firm by having more amounts of debt but as a whole if firm succeeded to manage
optimal debt and equity combination then it may achieve more growth prospects.
In assets portion of balance sheet, non-current assets are increasing with different proportions
having an average of 2.63%. In this section, heads of Property, plant and equipment, long
term loans and long term deposits and prepayments have been majorly affected by change
over time. In last year there is a considerable increase in property plant and equipment which
shows new investment resulted in increase in equity portion.
From 2016-17 firm has experienced huge change in long-term loans and long-term
prepayments; 71% and 91% growth correspondingly, which was a major indicator of growth
in profits and non-current assets investment. In the same fashion, current assets were also
recorded to grow in all years except 2014-15. Here cash, short term prepayments and stores
and spares were major effected items. Overall, total assets grew over the years. This shows
firms growth over the year by expanding the operations of the firm with the passage of time.
On average total assets grew by 1.82%. The highest increase was recorded in 2016-17 due to
low cost of sales and other expenses enabling the firm to retain the earnings and invest those
in assets. This internal source of finances may open the doors of prosperity upon firm,
because internal financing is the cheapest source of finance as they also do not impose any
obligation on firm and enable them to increase the future growth prospects.
26
Balance Sheet of Crescent Textile Mills

Balance Sheet Horizontal Analysis (rotating base)
Account Title 2014-15 2015-16 2016-17 2017-18 2014-18 2019
Property,Plant and Equipment -0.86% 8.58% 44.14% -2.32% 12.38% 7,111,734,744.11
Intangible Asset 0.00% 0.00% 1.00% -34.28% -8.32% 11,128,904.03
Investment in associate 8.71% -100.00% 0.00% 0.00% -22.82% -
Long term investments 0.06% 35.72% 49.80% -27.68% 14.47% 4,276,919,908.91
Long term loans and advances 10.73% -21.75% -32.89% -43.76% -21.92% 844,829.97
Long term deposits and prepayments -24.77% -3.26% -2.65% 99.61% 17.23% 12,046,929.52
Deferred income tax asset -100.00% 0.00% 0.00% 1.00% -24.75% 96,184,550.00
Stores,spare parts and loose tools 13.07% 4.56% 3.50% 3.39% 6.13% 210,168,415.50
Stock in trade -10.21% 22.31% 24.04% 27.59% 15.93% 3,001,421,579.11
Trade debts 14.16% -7.84% -5.47% 4.93% 1.45% 2,380,260,075.83
Loans and advances 14.82% 12.13% 22.94% 19.15% 17.26% 805,616,101.22
Short term deposits and prepayments 11.46% 29.16% 110.82% -2.21% 37.31% 83,364,523.48
Accrued Interest 15.39% -18.92% -6.04% -17.61% -6.79% 2,964,862.34
Other receivables 30.33% 51.94% 10.80% 13.08% 26.54% 1,792,196,342.87
Short term investments -19.67% 42.99% -6.54% 6.99% 5.94% 100,063,696.98
Cash and bank balances -25.09% 78.96% -58.10% -12.37% -4.15% 3,271,282.10
Non current asset held for sale 1.00% -100.00% 0.00% 0.00% -24.75% -
Long term financing 26.31% 345.40% 138.73% -20.52% 122.48% 1,880,116,048.58
Liabilities against assets subject to finance lease -74.75% -100.00% 0.00% 0.00% -43.69% -
Deferred income tax liability 1.00% 79.98% -99.55% -100.00% -29.64% -
Trade and other payables 16.15% -23.08% 21.00% 34.23% 12.08% 1,667,841,977.22
Unclaimed dividend 0.00% 1.00% 10.12% -1.26% 2.46% 9,747,482.92
Accrued markup -12.11% -29.69% 9.09% 30.90% -0.45% 85,208,798.45
Short term borrowings -0.06% 8.00% 5.57% 10.82% 6.08% 6,807,002,939.95
Current portion of non current liabilities -31.88% -41.19% 189.57% 35.54% 38.01% 356,119,229.30
Provision for taxation -14.76% -32.66% -55.44% 349.34% 61.62% 227,242,798.05
Contigencies and Commitments 0.00% 0.00% 0.00% 0.00% 0.00% -
Authorized Share Capital 100000000 ordinary shares of Rs.10 0.00% 0.00% 0.00% 0.00% 0.00% 1,000,000,000.00
Issued, subscribed and paid up share capital 25.00% 30.06% 0.00% 0.00% 13.76% 910,110,258.26
Reserves 9.64% -100.00% 0.00% 0.00% -22.59% -
Capital reserves 0.00% 0.00% 0.00% 0.00% 0.00%
Premium on issue of right shares 0.00% 1.00% 0.00% 0.00% 0.25% 200,669,422.50
Fair value reserve 0.00% 1.00% 170.83% -54.92% 29.23% 1,584,298,413.43
Surplus on revaluation of operating fixes assets-net of deferred income tax 0.00% -3.35% 61.48% -0.21% 14.48% 4,084,033,248.67
Revenue reserves 0.00% 1.00% 0.51% 0.63% 0.53% 2,590,425,200.12
Total Current Assets 9.78% 9.15% 8.79% 14.81% 10.63% 8,379,326,879
Total Non-current Assets -0.15% 13.15% 46.76% -12.47% 11.82% 11,508,859,867
Total Current Liabilities 1.24% 0.53% 8.93% 16.72% 6.85% 9,153,163,226
Total Non-current Liabilities 16.54% 251.30% 111.27% -20.54% 89.64% 1,880,116,049
Total Equity 6.93% 17.87% 45.66% -15.07% 13.85% 9,369,536,543
No.of shares outstanding 25.00% 30.06% 0.00% 0.00% 13.76% 91,011,014
Total Assets 3.95% 11.40% 30.55% -2.76% 10.79% 19,888,186,746 514,629,071
Total Equity and Liabilities 3.95% 11.40% 30.55% -2.76% 10.79% 20,402,815,817
27
Interpretation
Over the years, growth in paid up capital can be observed in the balance sheet of crescent
textile mills. Equity portion tend to increase in capital structure of the company which is a
good prospect in bright future. It is a good sign of self-dependency as firm is now focused on
increasing its equity to reduce the risks associated with external sources of finances. It is also
an indicator of sustainable growth of the firm in future endeavours. But in last year equity is
decreased by 15%. On average the equity grew by 13.85% during the study period.
If we talk about liabilities section of balance sheet, current liabilities is also increasing over
the years but with lesser proportion of equity except for the last year having an average of
6.85%. Short term borrowings are showing an increasing trend which means firm has to rely
on external sources to meet its growth needs. This increase can be attributed to increase in
use of export refinance scheme by the company. Taxes are showing sizeable decreasing trend
in all years except the last one where it has taken a surge of 349.34%. Non-current liabilities
are a major bearer in this section having an increasing trend due to increases in long term
financing because of LTFF loans except for the last year with an average of 89.64. Highest is
recorded in year 2016 with increase in long term financing and deferred income tax. In the
same year liabilities against assets subject to finance lease decreased by 100% and kept on
0% till the last year. Overall, firm is showing mixed trend of equity and liabilities section but
in last year firm tends to lean towards current liabilities and relying on external sources of
fund.
Asset section of company’s balance sheet shows increasing trend except for the last year
where assets decrease by 2.76%. Overall assets have an average of 10.79%. Long term
investments are increasing except for the last year. Long term loans and advances are
showing the considerable decreasing trend having an average of -21.92%. Overall, total non-
current assets are declining in first and last year and increasing in middle two years exhibiting
the mixed trend whereas total current assets are increasing in all analysis years. Receivables
are also showing increasing trend in all the years. Short term deposits and prepayments is
increasing except for the last year. Loans and advances are showing increasing trend in all the
years. Stock in trade is increasing all the years except the first one whereas cash and bank
balances are decreasing except for the year 2015-16. Overall, current assets grew from 2014
to 2018 with major increase occurring from 2015-16 which, as mentioned earlier, was due to
the improvement in profitability of the whole industry.
To sum up, Crescent was seen to remain focused on non-current assets investment
accompanied with minor fluctuations in current assets investment over the years.
28

Horizontal Analysis with rotating base
Account Title 2014-15 2015-16 2016-17 2017-18 Average 2019
Sales -6.00% -6.21% 2.60% 9.10% -0.13% 53,660,701,516.66
Cost of Sales -3.06% -7.52% 5.05% 9.83% 1.07% - 48,696,097,395.86
Gross Profit -23.39% 3.57% -13.78% 3.17% -7.61% 4,964,604,120.80
Distribution cost -5.02% -11.89% 10.76% 2.97% -0.80% - 2,418,697,351.02
Administrative expenses 6.73% -0.84% 3.32% -4.82% 1.10% - 1,086,068,141.40
Other expenses 6.28% -13.45% -34.52% -8.57% -12.56% - 165,890,775.86
-45.83% 26.39% -37.76% 10.30% -11.72% 1,293,947,852.51
Other income 9.63% 1.86% 4.43% -3.69% 3.06% 4,228,020,534.87
Profit from Operations -19.13% 10.38% -12.34% 0.26% -3.12% 5,521,968,387.38
Finance cost 8.38% -40.04% -12.54% 8.61% -8.90% - 905,405,211.88
Profit / (loss) Before Taxation -26.54% 30.41% -12.31% -1.26% -2.42% 4,616,563,175.50
Taxtation 3.24% 67.78% -5.49% 13.46% 19.75% - 1,029,833,547.53
Profit / (loss) After Taxation -29.04% 25.85% -13.42% -3.88% -5.12% 3,586,729,627.96
Interpretation
Nishat Textile Mills sales decline in year 2014-15 and 2015-16. But in 2016-17 sales grew by
2.6% and 9.10% in year 2017-18. This increase may be attributed to increased exports during
these years due to government’s incentives on exports and favourable rate variances.
Increased cost of raw material decreased the gross profits of the firm, gross profit decreased
except from 2015-16 and 2017-18. In fact last year has the highest cost of sales. Distribution
costs of the firm has considerable fallen in year 2015-16 but it kept on increasing in all other
years. Administrative expenses also increased by a significant percentage in initial year, and
from 2016-17 too, along with a minor decline from 2015-16. Increase was chiefly due to
increased minimum wages by the government authorities. In last year these expenses again
have fallen.
Furthermore, other income was the major contributor to profits of the firm, which has
increased in all years of the study period except the last one. The highest increase was seen
from 2014-15, where firm received a huge amount of dividend in this period due to
investment in Nishat Linen. Profit from operations deteriorated in year 2014-15 and 2016-17.
Variations in all aforementioned items caused operating profits to fluctuate. Finance cost of
the firm fell in year 2015-16, 2016-17 due to subsidized loans. Finally, taxation showed a
mixed trend in all the years.
To sum up, Nishat textile experienced decline in its net profits except for the year 2015-16
where there is an increase in profitability of 25.85% which is the bright year for the whole
industry in terms of profitability.
29

Horizontal Analysis of Income Statement with Rotating Base
Account Title 2014-15 2015-16 2016-17 2017-18 2014-18 2019
Sales -4.65% -10.61% 2.78% 4.06% -2.10% 11076096531.83
Cost of Sales -6.47% -10.49% 7.17% 3.16% -1.66% -10044569311.45
Gross Profit 10.00% -11.43% -27.47% 13.20% -3.92% 1031527220.38
Distribution cost 6.16% -2.32% 1.63% -27.26% -5.45% -442683783.70
Administrative expenses 19.55% 21.08% 5.91% -1.67% 11.22% -327860052.56
Other expenses -5.65% -57.98% -61.48% 40.07% -21.26% -11215829.46
13.04% -30.05% -95.38% 1660.68% -19.41% 249767554.66
Other income -46.41% 94.66% -7.09% -7.08% 8.52% 352518211.84
Profit from Operations -11.80% 1.61% -52.44% 76.07% 3.36% 602285766.50
Finance cost -9.27% -15.99% -20.33% 122.34% 19.19% -760057003.16
Share of profit / (loss) from associate -156.96% 119.87% -100.00% 0.00% -34.27% 0.00
Reversal of carrying amount of investment in associate 0.00% 1.00% -100.00% 0.00% -24.75% 0.00
Profit / (loss) Before Taxation 4.80% -3.68% -76.59% -87.46% -40.73% -157771236.66
Taxtation 32.40% -30.45% -133.49% -105.34% -59.22% -701353.97
Profit / (loss) After Taxation -7.25% 13.01% -54.76% -92.54% -35.38% -158472590.63
Interpretation
Crescent was unable to maintain its profitability, profits moved from bad to worse in all years
except year 2015-16. Firm was efficient to control its cost of sales which declined in first two
years but then it again increased leading to decrease in gross profit of those years. The period
from 2016-17, 2017-18 was somewhat prosper in terms of increase in sales.. Gross profit
increased from 2014-15. Distribution cost showed mixed trend. First it increased by 6.16%
then decreased then again increased and then decreased considerably. Administrative
expenses kept on increasing with every passing year except the last one. Finally, other
expenses kept on decreasing until year 2016-17 but then increased to 40.07% in year 2017-
18.
Similarly, other income from year 2014-15 decreased but again 2015-16 comparatively saw a
huge boost in other income, primarily because of huge growth in dividend receipts to the firm
due to investment in shakargunj Limited. The profit from operation was noticed with mixed
trend by sometimes increasing and sometimes decreasing. Finance cost of Crescent has
continuously decreased but in last year it increased drastically by 122.34%. Share of profit
from associate soured with every passing year except 2015-16 due to selling of shares of
Bahuman Crescent Mills. Finally, taxation first rose in year 2014-15 but then was observed to
decline over the years and the major decline was recorded from 2017-18.
Crescent in terms of profit was good in 2015-16 where it increased by 13% as again this year
was a bright one for the whole industry.
30
Comparative Analysis
In horizontal analysis of both firms, the equity section is increasing throughout the study
period except for 2017-18. In year 2014-15, Nishat is increasing equity proportion more than
crescent but in next two periods, Crescent is more aggressively increasing than Nishat mills.
In last year both firms has experienced a decline in equity with crescent having a more fall in
equity. Nishat has on average increased its equity at 3.06% whereas Crescent’s on average
increase is 13.85%.
Now if we talk about liabilities portion of both firms, Nishat has experienced decline in 2014-
15 and 2017-18 with overall growth of 0.18% whereas Crescent has shown more growth with
an increase in every year having average of 6.85%. The non-current liabilities of Crescent has
shown increase aggressively except for the year 2017-18 with an average of 89.64% with
long term financing as a major contributor. On the other hand, Nishat’s non-current liabilities
are decreasing every year except for year 2016-17 with deferred income tax and long term
financing as major bearers of change in this section.
Overall, Nishat has more focused on equity throughout the five years whereas Crescent more
inclined towards debt financing but increased its equity proportion with every passing year.
The assets section of Crescent has gone through increase every passing year with current
assets having an average growth of 10.63% whereas Nishat also concentrated on increasing
its current assets all the years except 2014-15. The non-current assets of Crescent mills has
experienced a decline in 2014-15 and 2017-18 with an average of 11.82% whereas Nishat has
seen decline in year 2017-18 with an average growth of 2.63% in the study period.
In short, Nishat has grown its assets in all years except 2017-18 with the highest increase
recorded in 2016-17 whereas crescent’ asset have also increased except 2017-18 and the
highest increase was recorded in 2016-17.
In terms of profit and loss statement, Nishat mills experienced decline in is net profit in all
years except from 2015-16 this year was prosperous for Crescent as well, so the universal
reason behind this increase in profits was government incentives. From 2014 to 2016 Nishat
has managed to cut its cost of sales, and in rest of the years cost of sales rose. Both firms
recorded increase in their administrative expenses almost in all years which brought the
operating income down. Other income was the major contributor to the profits of both firms.
Nishat has recorded increase in it at the end of every year while Crescent has increased its
other income 94% in 2016 and in rest of the years it declined. Finance cost was controlled by
both firms by reduction being noticed all years except 2017-18 due to increase in interest rate
by SBP. Lastly, net profits of Nishat just shown increase in 2016 and Crescent experienced
the profit in the same year by 13%.
To sum up, both firms have expanded their balance sheet in this period of study, by Nishat
holding a stronger balance sheet than Crescent. While in terms of profitability Crescent was
observed to be very keen in increasing its profits by controlling the cost as compared to
Nishat, though Nishat was more profitable than Crescent.
31
Balance Sheet Ratios
Liquidity Ratios
Current Ratio
Current Ratio
2014 2015 2016 2017 2018
Crescent Mills 0.76 0.83 0.90 0.90 0.89
Nishat Mills 1.34 1.26 1.32 1.27 1.37
1.6
1.4
1.2
1
0.8 CT
0.6 NT
0.4
0.2
0
2014 2015 2016 2017 2018
Current ratio is a best gauge of knowing the company’s ability to meet its short-term
obligations as they come due. It shows the liquidity position of the firm by comparing the
current assets to current liabilities of the concerned period
Crescent has kept low current assets in relation to current liabilities in these 5 years of study.
But it strived to increase its current assets slightly in first three year by increasing its retained
earnings throughout these 5 years. From 2014-2015 it has decreased its short-term
borrowings by a substantial amount that leads to decrease in current liabilities. Lastly, in
2016 government of Pakistan has announced huge tax refund which uplifted its liquidity.
The current ratio of Nishat Textile Mills is showing a mixed trend but is greater than 1 which
means company has enough current assets to meet its current liabilities and it will have extra
current assets left after meeting all obligations.
To sum up, both the firm remained better in terms of liquidity. Nishat was comparatively
better despite of decreasing ratio while Crescent was also keen enough by improving its
liquidity with every passing year. Creditors will be more than happy to lend money to Nishat
Textile mills because of their strong credit standing.
32
Quick Ratio
Quick Ratio
2014 2015 2016 2017 2018
Crescent Mills 0.53 0.62 0.65 0.61 0.57
Nishat Mills 0.74 0.72 0.81 0.72 0.79
0.9
0.8
0.7
0.6
0.5
CT
0.4
NT
0.3
0.2
0.1
0
2014 2015 2016 2017 2018
Quick ratio shows the liquidity position of a firm to meet its short-term debt obligations by
excluding the inventory.
Crescent mills continuously increased its quick ratio by decreasing its investment in
inventory from 2014-2016. And in 2017 and 2018 it has increased its inventory which pushed
down its quick ratio in 2017 and 2018 as compared to the previous year.
It can be concluded based on above figures that the firm is keeping quick ratio of less than
one, which reflects that it is greatly relaying on the inventory to pay the short-term debts as
they come due.
Nishat Textile Mills is showing mixed trend of increase and decrease in its quick ratio over
the years. After deducting inventory from current assets of company, its ratio has fallen
below 1 which means company was heavily relying on inventory to pay its short term
obligations.
Finally, it can be concluded based on above figures that both the firms are keeping quick ratio
of less than one, which reflects that both firms are greatly relaying on the inventory to pay the
short-term debts as they come due. Creditors will have to analyse the industry trend before
deciding whether to lend money to Nishat textile mills or not because some industries must
have a high level of inventory due to their nature of business.
33
Net Working Capital
Net Working Capital

2014 2015 2016 2017 2018
Crescent Mills -1,547,235,000 -1,144,274,000 -682,489,000 -751,640,000 -1,000,243,000
Nishat Mills 7,221,773,000 5,022,949,000 6,297,789,000 6,259,589,000 7,782,469,000
10,000,000,000
8,000,000,000
6,000,000,000
4,000,000,000
CT
2,000,000,000 NT
0
2014 2015 2016 2017 2018
-2,000,000,000
-4,000,000,000
Net working capital of crescent textile mills is negative in all 5 years which means that it
does not have sufficient current assets to meet the obligations of current liabilities. Its current
liabilities are more than its current assets and it has to borrow or raise money to remain
solvent.
Creditor would be reluctant to lend money to Crescent Mills because of negative balance of
net working capital.
Again Nishat Mills is showing mixed trend of increase and decrease over 5 years in net
working capital. But the figure is positive which means firm has surplus current assets left
after meeting its current liabilities.
The positive net working capital is a good sign for Nishat Mills because creditors will be
willing to lend money to the firm because of its strong financial position.
34
Cash Ratio
Cash Ratio
2014 2015 2016 2017 2018
Crescent Mills 0.0074% 0.0057% 0.0075% 0.0051% 0.0056%
Nishat Mills 6.21% 2.22% 3.92% 2.20% 2.61%
7.00%
6.00%
5.00%
4.00%
CT
3.00%
NT
2.00%
1.00%
0.00%
2014 2015 2016 2017 2018
For Crescent Mills, cash and bank balances and short term investments are considered as cash
equivalents. Cash ratio of crescent textile mills is less than 1 in all five years which means it
doesn’t have enough cash and cash equivalent to pay short term liabilities of the firm.
Creditors would be reluctant to give loan on the basis of this ratio. They will analyse other
measures as well to judge the financial standing of company.
Cash ratio of Nishat textile mills is showing a mixed trend. In year 2014, its cash ratio is
6.21% then it decreased to 2.22% in 2015. In 2016 it increased to 3. 92% then again
decreased in 2017 and then again increased in 2017.
Although increased cash ratio is good for company but if it is more than 5% like in year 2014
which is 6.21% it is not considered good because cash is not used efficiently and it should be
kept in cycle. In short, the cash ratio figure shows that company has enough cash and cash
equivalents to pay its current liabilities.
Overall, Nishat was in good position in terms of cash ratio as compared to Crescent. But
Crescent has remained interested to boost its cash ratio by brining positive changes in cash
and equivalents
35
Net Working Capital to Total Assets
NWC to TA
2014 2015 2016 2017 2018
Crescent Mills -12.91% -9.19% -4.92% -4.15% -5.68%
Nishat Mills 7.44% 4.97% 5.91% 5.33% 7.58%
0.9
0.8
0.7
0.6
0.5
CT
0.4
NT
0.3
0.2
0.1
0
2014 2015 2016 2017 2018
Net working capital of crescent textile mills is negative but increasing every year except 2018
which is a good sign as company is trying to increase its current assets to pay its current
liabilities. But the negative balance shows that company won’t be able to pay its short term
obligations on time. Creditors would be reluctant to provide loans based on this ratio for
crescent textile mills.
For Nishat Textiles, The percentages of net working capital to total assets are showing mixed
trend. The positive figure shows that company has enough current assets to meet its current
liabilities and would be able to pay its liabilities on time.
In short, Creditors will be happy to lend money to Nishat textile mills as compared to
Crescent Textile Mills because of timely payment of liabilities.
36
Working Capital to Total Assets
WC to TA
2014 2015 2016 2017 2018
Crescent Mills 41.26% 43.57% 42.69% 35.57% 42.00%
Nishat Mills 29.66% 23.92% 24.25% 24.67% 28.27%
50
40
30
CT
20 NT
10
0
2014 2015 2016 2017 2018
If we carefully analyse the working capital to total assets ratio of Crescent Mills, the ratio is
increasing every year but in 2016, due to decrease in trade debts the ratio is decreasing. The
increasing working capital is a positive sign which means company’s liquidity is improving
over the time period.
For Nishat Mills, Working capital to total assets is increasing in all years except 2015. The
increase in net working capital is a positive sign which shows that company is trying to
increase its current assets over the years which means company’s liquidity is increasing over
time. The decreasing working capital in 2015 due to decrease in inventory and cash & cash
balances.
To clinch the discussion, both firms had altered their current and long-term assets as per their
operational needs. Crescent has tended to maintain high current assets as compared to Nishat
Mills.
37
Debt Ratio
Debt Ratio
2014 2015 2016 2017 2018
Crescent Mills 55.20% 53.91% 51.24% 45.59% 52.48%
Nishat Mills 29.32% 24.72% 22.93% 24.48% 26.30%
60
50
40
30 CT
NT
20
10
0
2014 2015 2016 2017 2018
The debt ratio of crescent textile mills is decreasing every year except 2018 which is a good
sign because it means firm is decreasing its dependence on liabilities over the years and total
assets of company are greater than total liabilities. So, it can pay its liabilities with its
reserves which shows increasing trend all these years. The debt ratio is increasing in 2018
because of increase in current liabilities of the company.
For Nishat Textile Mills, Debt ratio is decreasing in first three years shows that firm is
decreasing its dependency on external sources of funding and total assets of the company are
greater than total liabilities so it can pay its liabilities with its reserves. In 2015 and 2016 it is
highly dependent on internal finances through retained earnings and short-term borrowings
were also reduced in these years shows a good indicator for creditors. But in year 2017 and
2018, it is again increasing due to increased current liabilities and non-current liabilities. So,
company is having adequate portion of its assets financed by debt via debt.
Comparatively, Nishat Mills will be preferred here because of low debt ratio than Crescent
Mills in all years.
38
Equity Ratio
Equity Ratio
2014 2015 2016 2017 2018
Crescent Mills 44.80% 46.09% 48.76% 54.41% 47.52%
Nishat Mills 70.68% 75.28% 77.07% 75.52% 73.70%
90
80
70
60
50
CT
40
NT
30
20
10
0
2014 2015 2016 2017 2018
For Crescent Textile Mills, Percentage is increasing with every passing year except 2018
which means company is moving towards equity financing and lessening the proportion of
debt financing.
For Nishat Textile Mills, percentage is increasing in first three years but then slightly
decreasing. Still the proportion of equity is considerable showing company’s priority towards
equity financing.
Finally, it can be concluded that Nishat was more relying on equity financing keeping a
handsome part of assets financed through equity and Crescent though tended to increase
equity financing but still it was highly under debt financing.
39
Debt to Equity Ratio
Debt to Equity Ratio

2014 2015 2016 2017 2018
Crescent Mills 1.23 1.17 1.05 0.84 1.10
Nishat Mills 0.41 0.33 0.30 0.32 0.36
1.4
1.2
0.8
CT
0.6
NT
0.4
0.2
0
2014 2015 2016 2017 2018
For Crescent Textile Mills, this ratio is continuously decreasing with every passing year
except for year 2018 which is a good sign showing that company is depending less on debt
financing with every passing year, shifting its preference from debt to equity financing.
Although ratio is decreasing but its greater than 1 which means company has no more lending
options left behind.
For Nishat Mills, ratio is less than one and decreasing in first 3 years and slightly increasing
in last two years. Nishat mills is depending on equity financing more than debt shows that it
is using internal source of finance. As ratio is less than 1, implies that company can lend in
future if it wants.
In a nutshell, Nishat due to its high profitability was internalizing funds and replacing the
debts with own funds whereas crescent was mainly focused on debt to meet its financing
needs.
40
Income Statement Ratios
Profitability ratios
Gross Profit Margin
Gross Profit Margin

2014 2015 2016 2017 2018
Crescent Mills 11.08% 12.78% 12.67% 8.94% 9.72%
Nishat Mills 14.44% 11.77% 13.00% 10.92% 10.33%
16
14
12
10
8 CT
6 NT
4
2
0
2014 2015 2016 2017 2018
For Crescent Mills, from year 2014 to 2015 GP margin is increasing due to improved
material processing but for nishat mills is decreasing because of handsome increase in cost of
sales. 2016 again experienced decrease in margin due to dollar money rivalry but Nishat
managed to increase it through better fuel mix, cost control measures and efficient
management of tradable stock.
Figures in 2017 were bit low for both firms due to intense competitive environment in the
region accompanied with slow growth of textile sector which raised the cost of sales and
increased cotton prices. In Year 2018 , reason for lower percentage increase in gross profit as
compared to increase in sales percentage is high cost of raw materials and energy and
increase in depreciation charge mainly due to commissioning of new unit of Spinning
Division.
41
Operating Profit Margin
Operating Profit Margin

2014 2015 2016 2017 2018
Crescent Mills 6.96% 6.43% 7.31% 3.38% 5.73%
Nishat Mills 13.93% 11.99% 14.11% 12.05% 11.08%
16
14
12
10
8 CT
6 NT
0
2014 2015 2016 2017 2018
Both companies experienced decline in gross profit margin from year 2014 to 2015 because
of increased salaries and distribution cost. 2016 was the year of high growth. Firms have
increased their operating margin, factors behind this increase were almost same for both
firms, firstly they reduced their distribution and administration expenses and secondly, other
incomes of both firms also increased. Crescent has also received few additional dividend
incomes which gave upward shift to operating profits.
Year 2017 saw decline of ratio in both companies due to increase in cotton prices, increase in
labour cost due to increase in minimum wages from Rs. 13,000 to Rs. 14,000 per month,
increase in fuel and power cost and increase in depreciation charge of the Company due to
commissioning of new unit. In year 2018, Nishat’s margin has decreased due to increase in
raw material prices, distribution cost and decrease in other income whereas crescent mills
witnessed increased exports and local sales due to marginal increase in export and local
selling rates. Operating profit has also experiences decrease in distribution and administrative
cost.
42
Net Profit Margin
Net Profit Margin

2014 2015 2016 2017 2018
Crescent Mills 1.93% 1.87% 2.37% 1.04% 0.07%
Nishat Mills 10.13% 7.64% 10.26% 8.65% 7.63%
12
10
6 CT
NT
4
0
2014 2015 2016 2017 2018
For Nishat Mills net income decline in year 2015, 2017 and 2018 due to increased
depreciation, cost fluctuations and finance cost. While in 2016, despite of decrease in sales
as compared to previous year the profits increased due to improvement in overall operations
and appropriate cost controlling parameters. Lastly, 2017 remained tough for Nishat in terms
of profits because gas prices and high tariffs has increased its cost of production and the
exports also declined.
On the other hand, from year 2014 to 2015, Crescent experienced decrease in profits and
reasons were same as whole industry had faced: bearish prices and low growth. In 2016, it
has enhanced its profits through increased other income and reduced taxes. In 2017, it was
unable to keep the growing trend of previous year due to bleak textile exports and high cost
of doing business. Going forward in 2018, Crescent have made some necessary amendments
in currency risk policy to reduce our exposure to exchange loss in case of further rupee
devaluation. Moreover an aggregate increase in SBP policy rate by 75 bps during 2nd half of
the year also contributed toward increase in finance cost.
Taking everything into consideration, Nishat was very strong in terms of profits, despite of
reduction in profits over the years. It was having a profit ratio, many fold more than the
crescent over these 5-years.
43
Plowback/Retention Rate
Plowback/Retention Rate
2014 2015 2016 2017 2018
Crescent Mills 1.00 0.73 0.64 0.12 0.99
Nishat Mills 0.75 0.64 0.68 0.59 0.57
1.2
0.8
0.6 CT
NT
0.4
0.2
0
2014 2015 2016 2017 2018
For Crescent Textile Mills, retention rate is highest in 2014 shows that company is
reinvesting all its profit without paying dividend. Year 2015 and 2016 shows decrease in
retention rate but still company is inclined towards growing itself through internal sources of
financing. 2017 saw a huge decline in it by distributing 88% dividends. year 2018 once again
shows retaining of whole net income and financing through internal sources of company
without paying debts.
For Nishat Mills, retention rate is decreasing in all years except 2016 where the percentage
increased slightly. Main motivation behind this phenomenon may be to attract more
investors, because dividend serves to be a good tool to bring more investors and increase the
demand of the share, ultimately increase the share price in the market.
In a nutshell, both the firms were preferring to internalize the funds with a high ratio in order
to grow their business operations
44
Dividend Pay-out Ratio
Dividend Pay-out Ratio

2014 2015 2016 2017 2018
Crescent Mills 0 0.27 0.36 0.88 0.01
Nishat Mills 0.25 0.36 0.32 0.41 0.43
1
0.9
0.8
0.7
0.6
0.5 CT
0.4 NT
0.3
0.2
0.1
0
2014 2015 2016 2017 2018
Nishat and Crescent mills both have tended to increase the dividend payments. However, in
2016 Nishat has slightly declined its dividend payment for reinvesting the profits in the firm
for the purpose of future growth. Same was done by Crescent in 2014 and 2018 by not
declaring any dividend in order to grow the firm as per management’s desire.
Overall, both firm has followed the trend of increasing their dividend payment, which may
open the door of new equity financing for the firms’ as increased dividend serves as a tool to
motivate new investors for equity financing in the firm.
45
Time Interest Earned Ratio
Time Interest Earned Ratio

2014 2015 2016 2017 2018
Crescent Mills 1.83 1.78 2.15 1.28 1.02
Nishat Mills 4.71 3.52 6.47 6.49 5.99
4
CT
3 NT
2
0
2014 2015 2016 2017 2018
For Nishat Textiles, it has declined in 2015 by increasing long term financing because it
imposes a burden through financial costs. In 2016 and 2017 financial cost has decreased and
time interest ratio has increased once again making it attractive for the investors to invest in
the company. 2018 once again experienced a slightly low ratio.
On the other side, Crescent tried to increase its ratio in 2014 and 2016 by sizable reduction in
finance cost. in 2015 and 2017 this ratio has decreased due to overall low operating profits in
these year though finance cost decreased in 2017 but still low profits did not let it to increase
this ratio. 2018 again experienced considerable increase in finance cost which lead to
decrease in time interest earned ratio.
In short, Crescent was comparatively poor in terms of this ratio by maintaining it at a low
level whereas Nishat despite of decrease in ratio in some years still managed to keep it at a
good level making it attractive for the investors to invest in,
46
Leverage Ratios
Operating Leverage
Operating Leverage
2014-15 2015-16 2016-17 2017-18
Crescent Mills -0.85 -7.08 0.52 0.17
Nishat Mills 1.22 0.34 1.12 12.11
15
10
CT
0 NT
2014-15 2015-16 2016-17 2017-18
-5
-10
Operating leverage gives the picture that how much fixed assets contribute in income or
profitability of the company.
For Crescent Mills, all years are showing less than 1 ratio which means company is
inefficient and fixed assets are not contributing towards income or profit for the company.
For Nishat Mills, year 2014-15, 2016-17, 2017-18 shows ratio more than 1 showing above
breakeven point which means company is efficient and is profitable after fulfilling all its cost
and fixed assets are contributing towards income or profit for the company. The highest ratio
is recorded in year 2017-18. Whereas year 2015-16 shows ratio less than 1 which means the
fixed assets are unable to generate income for the company.
In short, comparatively Nishat textile mills is having more ratio than Crescent mills showing
better operating leverage making it more efficient than the opponent.
47
Financial Leverage
Financial Leverage
2014-15 2015-16 2016-17 2017-18
Crescent Mills 1.63 0.12 0.96 -0.82
Nishat Mills 0.66 0.40 0.92 -0.07
1.5
0.5 CT
NT
0
2014-15 2015-16 2016-17 2017-18
-0.5
-1
Financial leverage means how much company is efficiently using its debt to generate income
or profit.
For Crescent Textile Mills, in year 2014-15 financial leverage is greater than 1 which means
company is efficient and the assets acquired with the funds provided by creditors generate a
rate of return that is higher than the rate of interest or dividend payable to the providers of
funds. whereas in all other years ratio is less than 1 which means finance cost is greater than
rate of return generated by assets acquired with the funds provided by creditors. So the
company’s debt is not contributing towards the profit.
For Nishat textiles, all ratios are less than 1 which means return on assets financed by
creditors generates less return than their finance cost and the debt is not contributing towards
the positive return.
To summarize, Crescent is better in terms of financial leverage as it is utilizing its debt in a

more efficient way.
48
Total Leverage
Total Leverage
2014-15 2015-16 2016-17 2017-18
Crescent Mills -1.38 -0.88 0.50 -0.14
Nishat Mills 0.81 0.13 1.03 -0.82
1.5
0.5
0
2014-15 2015-16 2016-17 2017-18 CT
-0.5 NT
-1
-1.5
-2
Total leverage gives the combined picture of operating and financial leverage which means
that it shows how much company’s fixed assets are contributing towards its income and how
much company is efficiently using its debt to generate profits.
For Crescent mills, all years are showing negative figures except 2016-17 mean that the
leverage is not working efficiently and company is in loss and unable to cover its cost.
Moreover fixed assets are also not contributing towards profit. Year 2016-17 is positive but
less than 1 which again makes the company inefficient to use its fixed assets and debts to
generate profit.
For Nishat mills, the ratios are showing mixed trend of increase and decrease having a
negative figure in 2017-18 means the company is not using the leverage properly and not
even covering its cost. Year 2014-15 and 2015-16 is positive but less than 1 which makes the
company inefficient in using its fixed assets and debts adequately. Year 2016-17 shows ratio
more than one giving the picture of efficiency of Nishat mills that its using fixed assets and
debts efficiently to generate profit after covering the costs.
In short, both companies are having low ratios than 1 but Nishat is having 1.03 ratio in year
2016-17 making it comparatively better than Crescent textile mills.
49
Activity Ratios
Total Asset Turnover
Total Asset Turnover

2014 2015 2016 2017 2018
Crescent Mills 1.04 0.95 0.76 0.60 0.64
Nishat Mills 0.56 0.51 0.45 0.42 0.52
1.2
0.8
0.6 CT
NT
0.4
0.2
0
2014 2015 2016 2017 2018
Nishat mills experienced continuous decline in total assets turnover due to increase in total
assets but decrease in sales with every passing year except for the last year where it witnessed
an increase in turnover but assets are decreasing with increased sales.
In the same fashion crescent also observed continuous decrease except for the last year where
sales are also increasing with decreasing assets.
The decline for both firms is because of continuous increase in total assets more than the
increase in sales of both firms. Nishat chiefly focused on increased investment in non-current
assets and Crescent has shown somewhat mixed investment by sometimes increasing current
and sometimes non-current investments. Secondly, both firms also retained major parts of
their profits within the business which increased their total assets and resultantly, assets
turnover ratio has ultimately declined.
In short both firms have experienced decline in asset turnover but Crescent mills have been
better than Nishat mills in terms of more asset turnover.
50
Inventory Turnover
Inventory Turnover
2014 2015 2016 2017 2018
Crescent Mills 7.41 7.30 6.21 5.40 4.42
Nishat Mills 3.65 3.91 4.12 3.87 3.86
8
7
6
5
4 CT
3 NT
2
1
0
2014 2015 2016 2017 2018
Crescent has observed continuous decline in inventory turnover showing inefficiency of

management in optimal inventory management. Main reason was unnecessary increments in
inventory though the sales did not show handsome increases.
For Nishat, the ratio is showing increasing trend due to better inventory management. But in
last 2 years it again declined due to increase in inventory more than increase in sales.
To sum up, Crescent has remained better enough in terms of inventory management. While
Nishat, due to its huge inventory was not efficient enough to manage it.
51
Inventory Turnover in Days or Avg Age of Inventory
Inventory Turnover in Days or Avg. Age of Inventory

2014 2015 2016 2017 2018
Crescent Mills 49.27 49.99 58.74 67.56 82.51
Nishat Mills 99.93 93.38 88.65 94.26 94.57
120
100
80
60 CT
NT
40
20
0
2014 2015 2016 2017 2018
Nishat was having low inventory turnover ratio due to a huge inventory holding. And
Crescent was good in turning around its inventory into sales but the trend is increasing. Here
this ratio also is the elaboration of the previous one that Nishat has a very high inventory
turnover in days and weak inventory management whereas Crescent is maintaining a very
low turnover in days.
For Nishat reasons were the same, high inventory and low sales whereas reason for Crescent
was the adequate amount of inventory to be needed.
In short, Crescent has shown better results in converting inventory into sales. It took less days
in inventory turnover as compared to Nishat which was unable to manage it.
52
AR Turnover
AR Turnover
2014 2015 2016 2017 2018
Crescent Mills 5.52 4.92 4.29 4.73 4.94
Nishat Mills 18.59 17.22 18.22 21.89 17.12
25
20
15
CT
10 NT
0
2014 2015 2016 2017 2018
Nishat has remained better enough in this ratio as it has more and more actively collected
receivables on due time. The reason behind increasing ratio was sizable reduction in trade
debts in every year through on time collection.
The reason behind crescent’s mixed trend was variations in trade-debts in few years they
were noted to be increasing, resultantly, decreasing account receivable turnover and in rest of
the years trade-debts decreased which gave upward slope to the turnover, showing
improvements in collection procedure.
In short, comparatively Nishat has been better in terms of AR turnover due to timely payment
by its debtors or customers.
53
AR Turnover in Days or Avg. Collection Period
Accounts Receivable Turnover in Days or Avg. Collection Period

2014 2015 2016 2017 2018
Crescent Mills 66.12 74.25 85.09 77.24 73.92
Nishat Mills 19.64 21.19 20.03 16.67 21.32
90
80
70
60
50
CT
40
NT
30
20
10
0
2014 2015 2016 2017 2018
Crescent has remained less active in improving its turnover in days by showing mixed results.
Though in 2014, its turnover in days decreased but in 2015 and 2016 it increased due to
increased credits and poor collection management. Lastly, in 2017 and 2018 it has shown
some improvements again.
Nishat has improved its turnover in days by reducing the days required in collection. It has
approximately improved its collection period through better credit management.
In short, Nishat was very efficient in collection of its AR as it is less than Crescent Mills
which was weak in receivables management.
54
AP Turnover
AP Turnover
2014 2015 2016 2017 2018
Crescent Mills 4.27 3.45 3.42 5.55 3.50
Nishat Mills 7.03 5.44 4.53 4.70 4.44
8
7
6
5
4 CT
3 NT
2
1
0
2014 2015 2016 2017 2018
In our case, it can be seen that Nishat’s account payable turnover is decreasing with every
passing year. This decreasing trend can mainly be attributed to its laxity during settlement to
its suppliers. This deteriorating ratio may damage the reputation of the firm before suppliers
due to, slow payments may be less willing to give credits to Nishat in future transactions.
In the same fashion, Crescent also has not made any efforts to improve the account payable
turnover ratio. It has tended to decrease throughout the study period except 2017, where it
somewhat improved. For Crescent, the reason was its malfunctioning debt management
system. This decrease may affect the goodwill of Crescent and may also cause disturbances
in entire supply chain of the firm.
In a nutshell, both firms were not quite satisfactory in terms of account payable turnover but
comparatively Nishat was better. This deterioration in this parameter may adversely impact
their credit ranking in long run.
55
AP Turnover in Days or Avg. Payment Period
AP Turnover in Days or Average Payment Period

2014 2015 2016 2017 2018
Crescent Mills 85.51 105.83 106.68 65.75 104.35
Nishat Mills 51.95 67.15 80.52 77.71 82.20
120
100
80
60 CT
NT
40
20
0
2014 2015 2016 2017 2018
For Crescent, the ratio has shown same trends as it is increasing from 2014 to 2016, however
in 2017 it decreases indicating improvements in debt settlements. But from the next year, it
again came back to the previous trend of increasing. Reasons behind these increases were
was increase in account payables.
Similarly, for Nishat, the ratio has shown similar trends as in 2014 its high then from 2015 it
kept on decreasing until 2017 where it slightly increased but in last year it again dropped a
bit. The main reason behind these variations was the fluctuation in debts as increased debt
was increasing the finance costs and as a result firm was unable to manage them in an
appropriate manner and make on-time payments. Increasing average payment period may not
be useful for Nishat in long term as it may deplete its goodwill and credit ranking.
To sum up, both firms were not good in terms of this ratio. However, comparatively Nishat
was witnessed to be on high ranking, despite of increase in its ratio.
56
Operating Cycle or Free Cash Flow
Operating Cycle or Free Cash Flow

2014 2015 2016 2017 2018
Crescent Mills 115.38 124.24 143.82 144.80 156.43
Nishat Mills 119.56 114.57 108.67 110.93 115.89
180
160
140
120
100
CT
80
NT
60
40
20
0
2014 2015 2016 2017 2018
Nishat has witnessed decreasing trend in operating cycle in first three years which is a good
indicator and primarily attributable to decreasing account receivable turnover in days. due to
timely collection of trade debts. But in last two years it is slightly increasing due to increase
in average age of inventory which means nishat is taking more days t convert its inventory
into sales and ultimately in generating cash.
Crescent Mills has observed increasing trend in all years due to increasing AR turnover in
days and increasing trend of inventory turnover in days as well.
From above discussions, it can be concluded that both firms had a very high operating cycle
which may remain barrier to their future growth. But to some extent Nishat mills has kept on
working towards improving its cycle by bringing reductions in it with every passing year.
Our conclusion may be affected by industry averages because industry average will depict the
picture of industry norms and then deviation from that, which may enable us to draw a sound
conclusion.
57
Cash Conversion Cycle
Cash Conversion Cycle

2014 2015 2016 2017 2018
Crescent Mills 29.87 18.41 37.14 79.05 52.08
Nishat Mills 34.05 47.42 28.15 33.22 33.68
90
80
70
60
50
CT
40
NT
30
20
10
0
2014 2015 2016 2017 2018
For Crescent, the ratio was initially very high. Later it decreased in 2015. Again, it took an
upward move in 2016 but in 2017 it increased to a great extent but then fell again in 2018.
The reason behind considerable increase in 2017 is because of increasing inventory turnover
in days and decreasing Accounts payable turnover.
Crescent was maintaining this ratio in positive which shows that it makes payments to
suppliers before making collections from the creditors. Though this will keep the suppliers
satisfied but it may adversely impact its overall financial health as its collections are not
being made on-time, because on-time collection may enable the firm to magnify the returns
by investing this idle money in some other project.
For Nishat Mills, it is showing a mixed trend of increase and decrease. Reasons behind these
ups and downs are the collection and payment trends. Year 2015 shows an increased trend
due to late account receivables and increased average age of inventory.
To summarize, we can say that in first two years, crescent is performing better and in next
three years, Nishat has been better than crescent due to low cash conversion cycle.
58
Cross over Ratios
Return on Assets/ Return on Investments
Return on Assets
2014 2015 2016 2017 2018
Crescent Mills 1.99% 1.78% 1.81% 0.63% 0.05%
Nishat Mills 5.68% 3.87% 4.62% 3.63% 3.99%
3 CT
NT
2
0
2014 2015 2016 2017 2018
Return on assets indicates the efficiency of a firm in using its assets in profit generation. This
ratio shows that how good a firm is performing through comparison of resources employed to
net profits.
Crescent textiles is showing decreasing trend in year 2015, 2017 and 2018. The reason behind
this decrease is again increasing total assets but the return is not increasing on the same pace.
For Nishat Mills, year 2014 shows increased ROA because of its assets generating higher
returns. The reason behind decline in ROA in year 2015 and 2017 is increased assets but
decreased returns or declining net income. Overall its assets are generating handsome return.
Comparatively, Nishat Mills is performing better in terms of return on assets as compared to

Crescent Mills which shows its better assets management.
59
Return on Equity
Return on Equity
2014 2015 2016 2017 2018
Crescent Mills 4.45% 3.86% 3.70% 1.15% 0.10%
Nishat Mills 8.04% 5.14% 5.99% 4.80% 5.41%
9
8
7
6
5
CT
4
NT
3
2
1
0
2014 2015 2016 2017 2018
Return on equity illustrates contribution of equity in profit generation. It is used to measure

the ability of company in utilizing equity aptly and generating profits from the equity.
Equity returns of Nishat were very high in first year, owing to very good capital structure
with sound profitability, but it did not last long, in 2015 returns on equity decreased because
of increased equity and decreased profits. In 2016, it again took an upward move, despite of
equity getting increased as compared to previous year, mainly because of handsome profits,
though sales decreased. 2017 was also a year of reduced returns on equity primarily owing to
reduced profits due to increased cost of sales. Finally in 2018, equity is decreasing but sales
are increasing and net profit is also decreasing but very less than decrease in equity.
Although Crescent has increased its proportion of equity every year but having decreasing
returns on equity throughout 5 years. Generally, this decrease can be attributed to various
internal and external factors.
Comparatively, Nishat is having good return on equity as compared to Crescent Mills owning
a good capital structure with sound returns.
60
Per Share Ratios
Earning Per Share
Earning Per Share

2014 2015 2016 2017 2018
Crescent Mills 4.86 3.60 3.13 1.42 0.11
Nishat Mills 15.68 11.13 14.00 12.12 11.65
18
16
14
12
10
CT
8
NT
6
4
2
0
2014 2015 2016 2017 2018
Earning per share depicts how much a shareholder is earning at one share.
For Crescent Mills, the ratio is decreasing with every passing year having the highest in 2014
whereas Nishat textile mills is showing a mixed trend of increase and decrease.
Earning per share of Nishat is higher than Crescent textile mills having the highest in year
2014 which makes Nishat more attractive for the investors to invest in because it is earning
more income per share.
61
Book Value per Share
Book Value Per Share

2014 2015 2016 2017 2018
Crescent Mills 109.09 93.32 84.57 123.19 104.63
Nishat Mills 195.08 216.56 233.66 252.45 215.34
300
250
200
150 CT
100 NT
50
0
2014 2015 2016 2017 2018
Book Value Per Share

2014 2015 2016 2017 2018
Crescent Mills 243.49 202.48 173.44 226.43 220.18
Nishat Mills 276.02 287.66 303.18 334.27 292.20
400
350
300
250
200 CT
150 NT
100
50
0
2014 2015 2016 2017 2018
Book value per share is used by the lenders to find out the real worth of the company.
If we compare Nishat Mills and Crescent Mills, book value of crescent is declining with
every passing year except 2017 whereas book value of Nishat Mills is increasing with every
passing year of the analysis period except 2018 where it tends to fall. The highest value is
recorded in 2017 for both companies. But comparatively, Nishat’s book value is greater than
Crescent’s in all years.
In short, in terms of this ratio, Nishat is better than Crescent Mills because it has more worth
in eyes of lenders.
62
Market Value per Share
Market Value Per Share

2014 2015 2016 2017 2018
Crescent Mills 20.49 21.15 19.48 37.45 25.2
Nishat Mills 111.92 114.23 107.9 158.68 140.92
180
160
140
120
100
CT
80
NT
60
40
20
0
2014 2015 2016 2017 2018
If we compare Crescent and Nishat Mills, Market value per share of Crescent is lower than
Nishat and the highest is recorded in year 2017. Market value of Crescent is showing a mixed
trend of increase and decrease showing instability over the years.
Nishat Mill’s market value is far greater than the Crescent’s. The highest is recorded in year
2017. The market value of Nishat is also showing a mixed trend of increase and decrease
showing instability.
Comparatively, Nishat’s market value is far closer than its book value as compared to
Crescent mills which is far lower than its book value. In short, both firms are not near to their
book value but comparatively, Nishat is nearer than Crescent.
63
Price Earning Ratio
Price Earning Ratio

2014 2015 2016 2017 2018
Crescent Mills 23.04 31.69 34.45 112.00 1333.36
Nishat Mills 1.31 1.90 1.39 3.09 2.16
1600
1400
1200
1000
800 CT
NT
600
400
200
0
2014 2015 2016 2017 2018
Price earning ratio gives a better insight to investors whether the company is overvalued or
undervalued.
If we compare Crescent and Nishat textile mills, price earning ratio of crescent is increasing
with every passing year of analysis period. The highest is recorded in 2018 whereas crescent
mills is showing a mixed trend of increase and decrease with the highest in year 2017. But
Nishat’s ratio is far lower than that of Crescent Mills.
Comparatively, Nishat is better than Crescent mills because it has a potential to increase price
per earning ratio due to lower EPS whereas crescent Mill’s share is overvalued and does not
have the potential to increase now.
64
Sales per Share
Sales Per Ratio

2014 2015 2016 2017 2018
Crescent Mills 252.22 192.40 132.24 135.91 141.43
Nishat Mills 154.85 145.56 136.52 140.07 152.81
300
250
200
150 CT
NT
100
50
0
2014 2015 2016 2017 2018
Sales per share ratio intend to tell how much on average the company is earning on each
share?
By comparing Crescent and Nishat textile mills, we come to know that a sale per share ratio
of crescent is more than Nishat Mills in first two years whereas in last three years, Nishat is
on top.
Sales per ratio of both companies are showing a mixed trend of increase and decrease. In first
three years for crescent, its decreasing and in last two years its increasing whereas Nishat is
following the same trend of decrease in first three years and increase in last two years.
In short, Crescent Mills is better in first two years exhibiting increased ratio than Nishat
whereas in Last three years, Nishat is bypassing Crescent by showing an upper hand in this
ratio.
65
Sales to Book Ratio
Sales to Book Ratio

2014 2015 2016 2017 2018
Crescent Mills 2.31 2.06 1.56 1.10 1.35
Nishat Mills 0.79 0.67 0.58 0.55 0.71
2.5
1.5
CT
1
NT
0.5
0
2014 2015 2016 2017 2018
Sales to Book Ratio

2014 2015 2016 2017 2018
Crescent Mills 1.04 0.95 0.76 0.60 0.64
Nishat Mills 0.56 0.51 0.45 0.42 0.52
1.2
1
0.8
0.6 CT
0.4 NT
0.2
0
2014 2015 2016 2017 2018
If we compare Crescent and Nishat textile mills, Crescent’s ratio is higher than Nishat in
every year of analysis period. The ratio of crescent is decreasing with every passing year
except 2018 whereas Nishat is following the same trend of decrease in every year except the
last year.
Both companies have the highest ratio in 2014 with 2.31 and 1.04 for Crescent Mills and 0.79
and 0.56 for Nishat textile mills. In short, by comparing the ratios of both companies,
Crescent is better than Nishat as it is generating more sales with reference to total assets or
total stockholders’ equity.
66
Dividend per Share
Dividend Per Share

2014 2015 2016 2017 2018
Crescent Mills 0.00 0.96 1.12 1.24 0.00
Nishat Mills 3.98 3.98 4.48 4.98 4.98
6
5
4
3 CT
2 NT
1
0
2014 2015 2016 2017 2018
If we carefully observe both companies, we will get to know that Crescent Company is giving
less dividends than Nishat Mills making it less attractive for the investors. Crescent has given
0 dividends in first year and then for the next three years, dividends are increasing and the
last year it has again fallen to zero.
Nishat Mills is giving dividends 3.98 per share for the first 2 years and then increasing it for
the next three years making Nishat more attractive for investors because the dividends
payment is a good indicator for the company that it has strong financial position because they
are distributing dividends to its shareholders.
In short, Nishat is more attractive for investors to invest in as compared to crescent mills
because it is paying more dividends per share than Crescent Textile Mills.
67
Cash Flow Statement Ratios
OCF/Current short term loans or current portion of LTL
OCF/Current short term loans or current portion of LTL

2014 2015 2016 2017 2018
Crescent Mills 0.08 0.02 -0.10 -0.04 -0.05
Nishat Mills 0.30 0.40 0.38 -0.08 0.15
0.5
0.4
0.3
0.2 CT
0.1 NT
0
2014 2015 2016 2017 2018
-0.1
-0.2
This ratio shows how much a firm can pay current short term loans or current portion of
loans.
For Crescent Mills, the ratio is positive in first two years but very low and showing the
decreasing trend whereas in last three years the ratios are negative which means company is
unable to pay current loans.
For Nishat Mills, The ratio is positive in all years except 2017 which means firm is unable to
pay its current loans in this specific year whereas in all other years firm is able to pay its
current debt.
Comparatively, Nishat is better than Crescent textile mills because it is showing positive cash
flow in almost all years and has the capability to pay its current loans and debts with the cash
generated by operating activities.
68
OCF/Total Debts
OCF/Total Debts
2014 2015 2016 2017 2018
Crescent Mills 0.07 0.02 -0.08 -0.03 -0.03
Nishat Mills 0.17 0.19 0.19 -0.05 0.08
0.25
0.2
0.15
0.1 CT
0.05 NT
0
2014 2015 2016 2017 2018
-0.05
-0.1
This ratio depicts how much operating cash flow is able to pay total debts.
For crescent mills, in 2014 and 2015, ratio is positive but declining whereas next three years
show negative ratios showing that Operating cash flow is unable to pay dents of the firm
making it less attractive for the investors.
For Nishat Mills, all years exhibit positive ratios except 2017 which means firm has the
ability to pay its debt. In first three years, ratios are showing increasing trend. Although the
ratios are low but higher than Crescent mills which means that Nishat is much more attractive
for investors than Crescent Textile Mills.
In short, Nishat is much more attractive for investors than Crescent mills because it is able to
pay debts with operating cash flows as compared to the opponent.
69
OCF/No. of Shares Outstanding
OCF/No. of Shares Outstanding

2014 2015 2016 2017 2018
Crescent Mills 8.82 1.69 -6.83 -3.35 -3.90
Nishat Mills 13.90 15.07 13.38 -3.93 6.13
20
15
10
CT
5
NT
0
2014 2015 2016 2017 2018
-5
-10
This ratio provides information to the investors that how much operating cash flow will
generate income per share.
For Crescent mils, the ratio is decreasing whereas Nishat shows the mixed trend of increase
and decrease. Year 2017 shows negative figure for both companies which means firm’s
operating cash flow is unable to generate income per share. Year 2016 and 2018 are also
negative for crescent textiles depicting the zero income per share. Whereas for year 2014 and
2015, Crescent is generating income per share but shows a diminishing trend.
For Nishat Mills, all years except 2017 is showing handsome earning per share with
operating cash flows showing higher ratio than crescent.
In short, Nishat is comparatively better than Crescent showing more income per share than
Crescent textile mills.
70
OCF/Cash Dividends
OCF/Cash Dividends
2014 2015 2016 2017 2018
Crescent Mills 433977 1.76 -6.09 -2.69 -2577.79
Nishat Mills 3.49 3.78 2.99 -0.79 1.23
500000
450000
400000
350000
300000
250000 CT
200000 NT
150000
100000
50000
0
-50000 2014 2015 2016 2017 2018
This ratio is used to measure whether cash provided by operating activities has the tendency
to pay cash dividends.
For crescent mills, in year 2014 and 2015 ratio is positive showing that the firm has the
ability to pay dividends with the cash provided by operating activities whereas last three
years show negative figures depicting that firm is unable to pay cash dividends with operating
cash. The reason behind this ability of payment in 2014 is because the firm hasn’t paid any
debts this year.
For Nishat mills, all years have a positive figure except 2017 which shows that in 2017 cash
is used by operating activities and does not have the tendency to pay dividends that year
while in all other years it can pay cash dividends.
In short, by comparing both firms, Nishat is much better than crescent mills in year 2015,
2016 and 2018 whereas in 2014, crescent is better than Nishat mills having higher figure than
the opponent.
71
Conclusion
Being agro-based country, Textile industry is the backbone in the economy of Pakistan
contributing to its GDP. This industry generates employment opportunity for thousands of its
populants. The whole economic cycle starts with the cycle of cotton. Having the potential of
growth, major companies are getting into the battlefield and competing with each other.
However, the textile industry needs to get the attention of the government with considerable
incentives and efforts for the betterment of sector.
This report has drawn a picture of financial condition of two companies named as Crescent
textile mills and Nishat textile mills, considered as bright names of the sector competing for
their market shares. The horizontal, vertical and ratio analysis of both firms have been
computed to check the viability and financial standing of both the firms. Moreover, their
comparative analysis has also been done in order to get a clearer picture about the better
performance in both firms and which company is lagging behind.
First of all, in vertical analysis we have analysed that Crescent textile Mills is using debt
financing more than equity which means it depends on the external financing in order to run
its operation. So it’s under a great burden of paying off liabilities. Whereas, Nishat textile
mills is depending on equity financing which makes it more attractive for the investors
because it is the indicator of better financial position of the company as company has enough
resources and ability to invest from within. The income statement of Nishat is also showing a
better standing as compared to Crescent having a more weightage in net income than that of
Crescent’s.
Secondly, if we talk about horizontal analysis of both companies, we can see that crescent is
trying to increase its equity financing with every passing year which shows its inclination
towards equity more than debt financing. But it is unable to generate enough net income
which can indicate its better financial condition than that of Nishat’s. On the other hand,
Nishat is increasing its equity financing and having huge long term investments every year
and a considerable payment of dividends as well. The net income of Nishat textile mills is
also showing a negative trend but again comparatively it is better. For both firms, year 2016
has been better regardless of worldwide economic slowdown due to various government
incentives like availability of subsidized loans, duty drawbacks, sales tax and income tax
refunds etc.
Furthermore, ratio analysis has also been performed on both firms using various liquidity,
profitability, leverage ratios, cash flow ratios etc. All these three ratios have been in favour of
Nishat textile mills showing better results for Nishat than Crescent mills. Although Crescent
has shown better results in turning its assets and sales into cash but again Nishat is able to
earn more profit margin than Crescent making this firm once again favourite in eyes of
lenders and investors.
Overall, this report has also highlighted various hurdles in the growth of textile sector like the
energy shortfalls which has been a major barrier in the success of this sector. The shortfall of
energy has made these companies to go through increase in production costs. Otherwise the
72
availability of cheap raw material could have been a major contributor in the growth and
success of textile sector.
Similarly, Pakistan being an unstable political country, the changes in political structure of
the country has affected this sector adversely. Every new government changes polices of the
last government. The political strikes and shutdowns have forced the global market to show
its concerns regarding Pakistani textile firms and pushed them back due to such political
drawbacks. Moreover, due to various global sanctions by the international market on Pakistan
i.e entry of Pakistan in Grey List, has destroyed the image of Pakistan and has been under
great surveillance and scrutiny.
In short, by having a bird’s eye view we can say that Nishat has been better than Crescent in
all terms. If the government pay heed upon the textile sector of Pakistan, overall sector can
flourish by providing this sector some incentives and availability of cheap energy and fuel
resources. Moreover, Pakistan should put efforts to clear its international image to once again
play internationally without any trade barriers and impediments.
73

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Comparative Financial Reporting Analysis

INSTITUTE OF MANAGEMENT SCIENCES

Major competitors of Nishat Textile Mills are:

 Crescent Textile Mills

Mian Umer Mansha Chief Executive Officer

Mian Hassan Mansha Chairman

Mr. Khalid Qadeer Qureshi Director

Mr. Ghazanfar Husain Mirza Director

Syed Zahid Hussain Director

Mr. Farid Noor Ali Fazal Director

Mr. Maqsood Ahmad Director

Its vision is:

Some of the major competitors of Crescent Textile Mills include:

 Nishat Mills Limited

1 Mr. Muhammad Anwar Chief Executive Officer

2 Mr. Shaukat Shafi Chairman

3 Mr. Ahmed Shafi Director

4 Mr. Amjad Mehmood Director

5 Mr. Anjum Muhammad Saleem Director

6 Ms. Khalid Bashir Director

7 Mr. Khurram Mazhar Karim Director

Nishat Textile Mills Limited

Profit or Loss Statement

Income Statement of Nishat Textile Mills

Profit or Loss Statement

Nishat Textile Mills

Crescent Textile Mills

Nishat Textile Mills

Crescent Textile Mills

Nishat Textile Mills

Total non-current liabilities is subject to increase with considerable percentages due to

Crescent Textile Mills

Nishat Textile Mills

Crescent Textile Mills

Nishat Textile Mills

Crescent Textile Mills

Net Working Capital

Debt to Equity Ratio

Gross Profit Margin

Operating Profit Margin

Net Profit Margin

Dividend Pay-out Ratio

Time Interest Earned Ratio

To summarize, Crescent is better in terms of financial leverage as it is utilizing its debt in a

Total Asset Turnover

Crescent has observed continuous decline in inventory turnover showing inefficiency of

Inventory Turnover in Days or Avg. Age of Inventory

Accounts Receivable Turnover in Days or Avg. Collection Period

AP Turnover in Days or Average Payment Period

Operating Cycle or Free Cash Flow

Cash Conversion Cycle

Comparatively, Nishat Mills is performing better in terms of return on assets as compared to

Return on equity illustrates contribution of equity in profit generation. It is used to measure

Earning Per Share

Book Value Per Share

Book Value Per Share

Market Value Per Share

Price Earning Ratio

Sales Per Ratio

Sales to Book Ratio

Sales to Book Ratio

Dividend Per Share

OCF/Current short term loans or current portion of LTL

OCF/No. of Shares Outstanding