Financial Accounting Project

AISHA STEEL PAKISTAN

Group Members:
Maham Fatani(1811129)
Nimra Khan(1811115)
Mujeeb Samoo(1811125)
Hamna Pasha(1811109)
M.Faisal(1811364)

Submitted to: Sir Vijay

Table of content
1 Executive summary 2
2 Introduction to company 3
3 Two years comparison(2017-18)
Income statement…………………………………………………………………....... 3
Horizontal Analysis………………………………………………………. 3
Vertical Analysis………………………………………………………….. 4
Summery………………………………………………………………….. 4
Balance Sheet…………………………………………………………………………. 5
Horizontal Analysis………………………………………………………. 6
Vertical Analysis………………………………………………………….. 6
Summery………………………………………………………………….. 6
4 Trend Analysis(2014-2018)
Income statement……………………………………………………………………. 7
Horizontal Analysis……………………………………………………… 7
Summery…………………………………………………………………. 8
Vertical analysis………………………………………………………….. 8
Summery…………………………………………………………………. 9
Balance Sheet………………………………………………………………………... 10
Horizontal Analysis………………………………………………………. 10
Summery………………………………………………………………….. 11
Vertical Analysis………………………………………………………….. 11
Summery………………………………………………………………….. 12
5 Ratios Analysis
Liquidity ratios………………………………………………………………………. 12
Current……………………………………………………………………. 12
Quick………………………………………………………………………. 13
Summery………………………………………………………………….. 13
Efficiency ratios……………………………………………………………………... 13
Asset turnover…………………………………………………………….. 13
Inventory turnover………………………………………………………... 14
Debtor’s turnover…………………………………………………………. 14
Summery…………………………………………………………………... 15
Marketability ratios………………………………………………………………….. 15
Price earnings ratio……………………………………………………….. 15
Basic earnings ratio……………………………………………………….. 15
Price to BV ratio…………………………………………………………... 15
Summery…………………………………………………………………... 16
Leverage ratio………………………………………………………………………… 16
Debt ratio………………………………………………………………….. 16
Debt to equity ratio………………………………………………………... 16
Interest coverage ratio…………………………………………………….. 16
Summery…………………………………………………………………… 17
Profitability ratios……………………………………………………………………... 17
Gross Profit margin………………………………………………………… 17
Net profit margin…………………………………………………………… 17
Return on asset……………………………………………………………... 18
Return on equity……………………………………………………………. 18
Summery……………………………………………………………………. 18
6 Conclusion 19
7 Recommendation 19
8 Appendix 20

1
Executive summary:
Our financial report provides a thorough analysis and evaluation of financial position
of Aisha steel mills Ltd. It also profoundly delivers prospective of company’s profitability, liquidity, financing,
debts and investments probabilities which also may aid an investor’s decision. By using Aisha Steel Mills annual
reports, the methodology of analysis used in our report include a circumspect analysis of income statement, it tells
the profit-loss statement and also the loss of accounting value for assets, and balance sheet which shows how
company’s assets and operations are financed, a major determinant in investment decisions. We analyzed them
using horizontal, vertical and trend analysis. We also included ratio analysis such as profitability, liquidity,
marketability, and leverage. Aisha steel mill is established in 2005 and it started its commercial operation in 2012.
Aisha steel mill limited is a group of Arif Habib.
This report shows the relationship of income statement and balance sheet items with each other. The company
was in loss from 2014 to 2016 but after that they increase their production by increasing cost of sales thus increased
sales. For the cost of sales, they used the cash balance and current liabilities. The increase in sales results in high
gross profit but because of the high finance cost, which included some long-term finance and exchange losses. So,
the low revenue, high cost of sales and finance cost resulted in net loss for the company till 2016. But company
started work on its growth in 2017 by issuing more shares thus invested in its non-current assets, property and
equipment. The property and equipment also financed through liabilities to finance lease. The company improved
its net profit of the year from -53% to 26%. In this period, the company also increased their stock in trade for
increasing their sales and the stock-in-trade were financed through cash balance and current liabilities. Thus, in this
period, the company took short term borrowings for their operations. The total non-current liabilities decreased
throughout the years because company is not financing their growth through long-term finance. But finance to lease
increased in 2018 means company is using a little part of liabilities in financing property and equipment. The
company started growing in 2017 because investors now have attraction towards the company and the future of the
company looks so bright.
In the report, we analyzed ratios to check the company’s overall growth and efficiency. The short-term
borrowings tend to increase because the company has little liquid assets to finance its current liabilities. Overall
the company has improved its performance dramatically over the period of five years. It has reduced their operating
cycle by effectively using its assets, managing and selling its inventory and in collecting their receivables on time.
The overall investment is increased thus Price earnings ratio also increased. However, in recent years, the company
has fluctuation because of market price. In its leverage, the company could not maintain a good status as it was in
loss. Ratios such as debt and interest coverage showed that company did not provide sustainable returns over long
holding periods, which was dire for them as it these ratios indicate risk and mitigate the prospect of investments
protection. In its profitability ratio, the company was first bearing loss but later generated profits. Their sales and
profits have improved continuously. As the company could not manage its expenses especially its finance cost,
they did not get high profits.
Overall, company was experiencing a severe loss for many years but since 2017, it generated considerable profits
which gathered meaningful investments for them.

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Introduction of the company:
Aisha steel mills limited is a public limited company incorporated in Pakistan
under repealed companies’ ordinance 1984. It was established in 2005 and came into commercial operation in
2012. Aisha steel mills is a part of Arif Habib group and is one of the largest private sector investments in the value
added flat-rolled steel industry in Pakistan. The principal activity of the company is manufacturing and selling cold
rolled steel in coils and sheets. It is one of the largest manufacturers of flat rolled steel. Aisha steel mill has a vision
to be the manufacturer of cold rolled steel of par excellence. Aisha Steel is focused on customer’s satisfaction and
aim to provide them with best quality cold rolled coils. We target for long term mutually beneficially relationship
which adds value for both customers and Aisha Steel. In order to meet our mutual objectives, we aim to achieve
optimization of all processes from procurement to sales and capitalize on synchronization of entire value chain.
The raw material mainly consists of Hot Rolled Coils, which are imported mainly from Japan, Taiwan and China.
Prices are of HRC are linked with its international demand and supply.

Two years Comparison: The comparison of 2017 and 2018

Income Statement:
Income statement 2018 2017 Horizontal Vertical
Rs in Rs in
% 2018% 2017%
million million

Revenue 18,904 14,076 34% 100% 100%

Cost of sales (15,590) (11,987) 30% 82% 85%
Gross profit 3,314 2,087 59% 18% 15%
Selling and distribution cost (19) (19) 0% 0% 0%
2
Administrative expense (192) (188) 1% 1%
%
Other expense (143) (65) 122% 1% 0%
Other income 35 16 119% 0% 0%
Profit/loss from operation 2,995 1,831 63% 16% 13%
Finance cost (1,079) (949) 14% 6% 7%
Profit/loss before tax 1,916 882 117% 10% 6%
Taxation (632) 138 558% 3% 1%
Profit/loss after tax 1,284 1,020 26% 7% 7%
Earnings per Share
Basic 1.57 1.74 -10% 0.008 0.01
Diluted 1.54 1.31 17% 0.008 0.009

Horizontal analysis:
The revenue increased by 34% as compared to the last year; which means the company increased their production
and worked on their sales to generate high revenue. The increase in production lead to an increase of 30% in the
company’s cost of sales as the consumption of the raw material increased. But this increase is less than the increase
in revenue and as a result Gross Profit increased by 59%.
Selling and distribution cost is approximately same in both years while the administrative expenses increased by
2%, which includes salaries, allowance, etc. Other expenses increased to 122% which includes this year loss on

3
disposal of property, plant and equipment. Other income also increased by 119% which is due to scrap sales and
return on saving accounts.
Other expenses are high but because of other income and high gross profit, the company managed to increase their
profit from operation by 63%. Which indicates that the company can earn good profit this year as compared to
previous years.
Finance cost increased by 14%, this increase is mainly due to long term finance and exchange loss. Company tried
to reduce its non-current liabilities in this year and reduced short term borrowings by a good percentage.
Profit before tax increased by 117% which is because of high sales, low costs, high gross profit and other income.
Taxation increased by 558% because this year’s profit is high and there is a deferred tax too. So in the end the
company improved its profit for the year by 26%.
Earnings per share have two types of earning. One is basic earnings and other is diluted earnings. As the company
have high profits this year so it can be estimated that basic earnings per share should be high but because of the
previous losses, diluted shareholders will get more dividends and thus basic earning is reduced for adjustment of
diluted earnings. Thus, the basic earnings per share decreased from 1.74 to 1.57 whereas the diluted earnings per
share increased from 1.31 to 1.54.
Vertical Analysis:
To analyze we have taken revenue as a base (100%). According to the calculations about 85% of revenue is cost
of sales in 2017. The cost of sales shows a decrease in 2018 of 82%. This indicates that in 2018, the company
managed to increase its sales and reduce its cost reducing it to only 82% of total revenue. This resulted in an
increase in gross profit from 15% to 18% in the year 2018.
There are no major changes in the expenses and other income, hence the profit earned from the operations increase
only because of high gross profit earned, which shows an increase from 13% to 16%.This means that only 16% of
the total revenue is profit.
Profit/Loss from operations. The finance cost was 7% of total revenue in 2017, but it decreased to 6% in 2018, this
shows that the company is focusing on reducing its expenses.
The reduction in expenses lead to
An increase of 10% in profit before tax in the year 2018 from 6% in 2017, which indicates that company has
increased its sales and reduced its costs. High profit means high tax, so the tax increased to 3% in 2018 and as a
result the company got profit of 7% of total revenue. End profit is approximately same because of the high tax.
Summary for income statement:
The revenue increased in 2018 and as a result cost of sales also increased but the increase in revenue is much higher
thus company gets high gross profit. The company earned good other income because of scrap sales thus profit
from operations have also increased. On the other hand, finance cost have increased because company is reducing
its long-term finance but due to higher gross profit and other income the company managed to retain high net profit.

4
Balance sheet:
Balance Sheet 2018 2017 Horizontal Vertical
RS in Million RS in Million % 2018 2017
Property, plant and equipment 13,373 10,542 27% 65% 58%
Intangible 7 9 (22) % 0% 0%
Long term loans and advance 4 2 100% 0% 0%
Long term deposits 47 46 2% 0% 0%
Deferred tax 932 1,358 (31) % 5% 7%
Total non-current assets 14,366 11,958 20% 70% 66%
Stores and spares 112 96 17% 1% 1%
Stock in trade 4,312 3,715 16% 21% 20%
Trade debts 105 152 (31) % 1% 1%
Advances, deposits 405 525 (23) % 2% 3%
other receivables 145 139 4% 1% 1%
Tax refund due from
247 299 (17) % 1% 2%
government
Taxation-payments less
685 434 58% 3% 2%
provision
Cash and bank balance 45 861 (95) % 0% 5%
Total current asset 6,059 6,225 (3) % 30% 34%
Total assets 20,425 18,183 12% 100% 100%
Ordinary shares 8,322 6,856 21% 41% 38%
Cumulative preference shares 472 472 - 2% 3%
Difference on conversion of
cumulative preference shares (1313) (2,171) (39) % 6% 12%
into ordinary shares
7,481 5,157 45% 37% 28%
Subscription money against
- 2,176 (100) % - 12%
rights issue
7,481 7,333 2% 37% 40%
Accumulated loss 548 1,858 (71) % 3% 10%
surplus on revaluation of fixed
1,557 1,224 27% 8% 7%
assets
Total equity 6,934 5,476 27% 34% 30%
Long term finance 4,848 5,032 (4) % 24% 28%
Liabilities against assets
33 4 725% 0% 0%
subject to finance leases
Staff retirement benefit 51 40 28% 0% 0%
Non-current liabilities 4,933 5,077 (3)% 24% 28%
Trade and other payables 1,209 3,561 (66)% 6% 20%
Accrued mark-up 238 157 52% 1% 1%
Short term borrowings 5,045 2,434 107% 25% 13%
Current maturity of long term
500 250 100% 2% 1%
finance
Current liabilities 7,001 6,405 9% 34% 35%
Total liabilities 11,934 11,483 4% 58% 63%
Total equity and liabilities 20,425 18,183 12% 100% 100%

5
Horizontal analysis:
Non-current assets increased by 20% which includes 27% increase in property, plant and equipment which
indicates that the Company is growing. Total current assets decreased by 3% in which company has received its
debts receivables and company increased its stock through cash balance. The cash decreased by 95%and stock in
trade increased by 16% which is clear indication that company is using their cash in buying inventory and investing
in non-current assets. Liabilities against assets subject to finance leases also increase by 725% means some of the
non-current assets financed through leasing.
Most of the non-current assets is financed through equity as it increased by 27% in which ordinary shares increased
by 21% due to the company issuing shares in 2018. The accumulated losses reduced by 71% which indicated that
company was in losses in previous years but due to the shares issued in 2018, it managed to reduce its accumulated
loss.
In 2018, Non-current liabilities have decreased by 3% which means that the company is not using their liabilities
for expansion. That’s the best growing strategy that company is using assets and equity for financing non-current
assets. Current liabilities shows an increase of 4% indicating that the Company is borrowing for their short
operations. It also means that the company is buying its stock in trade through borrowings.
Vertical analysis:
To analyze we have taken total assets as a base (100%). In 2017, non-current assets was 66% and current assets
was 34%. The great part of non-current assets were property, plant and equipment which was about 58% of total
assets. This further shows that the company is focusing more on its growth. In current assets, major part is stock in
trade, consisting of 20% of total assets. This indicates that company is producing more goods. In 2018, property,
plant and equipment increased to 65% of total assets which clearly shows that the company is investing in its
growth. The current assets decreased from 34% to 30% and a major decline was observed in cash.
Keeping Total liabilities and equity as 100%; shows that liabilities have taken up a major portion. The company
issued shares in 2018 because of which the total equity increased from 30% to 34%. This helped the company to
finance its non-current assets. Company reduced its non-current liabilities in 2018, which means company is not
using long-term finance for growth which is the best option for the company. The current liabilities decreased to
34% but short term borrowing increased to 25% of total equity and liabilities, which means company borrows
money for their operations and stock.
Summary for balance sheet:
The company is investing in its non-current assets through its equity, cash and leased. This shows that the company
is going towards growth. The current assets decreased in 2018, because company reduced its receivables and cash
and they are using it to finance their stock-in-trade and non-current liabilities. The equity has increased because of
shares issued in 2018. The company is using its equity in growth and reducing the liabilities. The non-current
liabilities decreased mainly because of long-term finance which means company is growing not through liabilities
which is an indication of a good future growth for the company.

6
Trend Comparison: 2014-2018
Income Statement:
Horizontal Analysis:

Income Statement 2018 2017 2016 2015 2014

Rs in Rs in Rs in Rs in Rs in
% % % % %
Million Million Million Million Million

Revenue 18,904 34% 14,076 46% 9,634 1% 9,492 3% 9,259 113%

Cost of sales (15,590) 30% (11,987) 39% (8,654) -8% (9,451) 3% (9,200) 109%
Gross profit / (loss) 3,314 59% 2,087 113% 980 2290% 41 31% 59 -188%
Selling and
(19) 0% (19) -5% (20) -47% (38) -6% (36) -100%
distribution cost
Administrative
(192) 2% (188) 20% (157) 27% (124) -11% (140) 11%
expenses
Other expenses (143) 122% (65) 100% - 0% - 0% - 0%
Other Income 35 119% 16 36% 25 317% 6 99% 1,007 5200%
Profit from -
2,995 63% 1,831 121% 829 820% (115) 890 499%
operations 113%
Finance cost (1,079) -14% (949) -7% 1,021 26% (1,373) -6% (1,299) -46%
Profit / (Loss) before -
1,916 117% 882 558% (192) -87% (1,488) (409) -63%
tax 264%
-
Taxation (632) 138 273% 37 87% 277 347% 62 83%
558%
Profit / (Loss) for the -
1,284 26% 1,020 754% (155) -87% (1,211) (347) -53%
year 249%

Revenue: Each year, the revenue shows an increasing trend from 2013 to 2018. That’s because of higher price and
increase in sales volume. From 2014, revenue increased by 113% which is a great change. After that revenue
increased by only 3% and 1% in 2015 and 2016. This is due to high production and low sales. In 2017 and 2018,
the revenue increased by 46% and 34% which means they have worked again on their sales volume.
Cost of sales: Show an increasing trend. It increased by 109% in 2014. And in 2017 and 2018, it increased by 39%
and 30% respectively. The simple interpertation for this is that the price of raw material increased through the years
and increasing their cost of production.
Gross Profit/loss: There was a high gross loss before 2014. Because the revenue was small as compared to their
cost. But after 2014, the company earned a gross profit of 59 million which is about 188% increase as compared to
the gross loss in 2013. After that, as discussed earlier in revenue section that the sales volume increased by the
company and thus it is more than their cost so it earned a high gross profits. The company started work on their
sales efficiency which increased the revenue by 188%. It decreased again by 30% in 2015 which was 41 million.
But in the following year, the company’s gross profit increased by approximately 2,290% which is major
turnaround. Now if we see, only 1% of revenue increased in 2016 but cost of sales decreased by 8% which lead to
such a high gross profit. In 2017 and 2018, the gross profit increased by 113% and 59% respectively. In the recent
years (2017 and 2018), the revenue increased by a large number but at the same time, the cost of sales also increased
by large percentage and as a result the increase in gross profit is not large as compared to 2016’s gross profit.
Profit/loss from operations: The operations include selling and distribution cost, administrative expenses and
other expenses and income. In 2014, after getting gross profit, the company also got high other income which was

7
1,007 million. Comparing it with gross profit (59 million) we conclude that because of very high other income, the
company got good profits from operations in 2014. About 499% increased occured in profit from operations. But
in 2015, the other income decreased by 99% due to which the company faced a loss from operations. The expenses
didn’t increase so much in 2015 but they had low gross profit as well as low other income, due to which the profit
decreased by 113%. Although, in 2016 onward, other income didn’t increased but the gross profit increased by
good percentage because of high revenue and low cost and thus the company got high profits from operations.
Finance cost: Finance cost increased through the years. It includes some long term finance and exchange loses
etc. Each year, there was an increase in exchange loses that resulted in high finance cost.
Profit/loss before tax: Before 2017, the company’s profit before tax shows a loss. It is because of high finance
cost and low profit from operations. In 2016, company reduced their loss by 87% and that’s because of their gross
profit which increased by 2,290% as discussed above. The finance cost in 2016 is also high but because of high
gross profit, their loss before tax is reduced from (1,448 million) to (192 million). Which was the indication that in
the upcoming years, they can get profit before tax. Subsequently in 2017, company increased their profit before tax
by 558% which is because of very high revenue and low costs. Now in 2018, company has highest profit before
tax of all time.
Profit/loss after tax: The company faced losses till 2016 because of low gross profit, low profit from operations
and high finance cost. In 2016, the gross profit increased by 2,290% but this high percent increase is actually
because of very low gross profit in 2015. The company got overall 980 million profit in 2016 but due to its finance
cost being high the company faced a loss. Now if we see in 2017, the company’s profit after tax increased by 754%
Due to high revenue and low costs. And in 2018, the company has highest profit after tax of all years.
Summary for Horizontal Analysis:
The revenue keeps on increasing throughout the years due to higher prices and increase in sales volume. There was
an increment in the cost of sales as well due to an increase in the price of raw materials. Before 2014, the company
faced a high gross loss due to lower revenue as compared to the cost. In the upcoming years, it started earning a
gross profit, which reached massive levels in 2016 due to better sales. Due to higher other income, the company
earned huge profits from its operations. In the later years, other income remained low yet the profit from operations
increased due to high revenue and low cost. Finance cost increased throughout these years due to an increment in
exchange loses. The company wasn’t able to earn a profit before tax till 2017 due to higher finance cost and low
profit yet it successfully reduced its loses by 2016 to a great extent this resulted in an increase in gross profit. Then
due to high revenue and low cost there was a good profit. Till 2016 it faced losses after tax due to low gross profit,
low profit from operations and high finance cost. Later it started gaining profit with the highest in 2018.
Vertical Analysis:

The revenue is taken as base of 100% for each year. Now if we look at the cost of sales, it decreased throughout
the years. In 2013, the company faced gross loss because the cost of sales was 102% means 2% of loss faced by
the company. But then in 2014 and 2015, the company managed to decrease its cost of sales and gained a little
gross profit of about 1%. In 2016, the company managed to decrease its cost to 90% which lead to an increase of
10% gross profit. Then 2017 and 2018, the company made a gross profit of 15% and 18%. So, in conclusion since
2013 the company improved from loss of 2% to profit of 18% in 2018.
Profit/loss from operations: the company improved from 5% loss in 2013 to 16% profit in 2018. After a loss in
2013, the company gained very high other income by restricting financial facilities in 2014. This income was about
11% of the total revenue. The gross profit was only 1% but because of 11% of other income the company got 10%
profit from operation. In 2015, the company face loss from operation about 1% because of low gross profit and low
other income. But after 2016, the company’s gross profit increased and thus they got profit from operations. The

8
expenses were high and other income was low but because of low cost of sales and high gross profit, the company
got 9%, 13% and 16% of profit from operations in 2016, 2017 and 2018 respectively.

Income Statement 2018 2017 2016 2015 2014

Rs in Rs in Rs in Rs in Rs in
% % % % %
million million Million Million Million

Revenue 18,904 100% 14,076 100% 9,634 100% 9,492 100% 9,259 100%
- -
Cost of sales 82% 85% -8,654 90% -9,451 100% -9,200 99%
15,590 11,987
Gross profit / (loss) 3,314 18% 2,087 15% 980 10% 41 0% 59 1%
Selling and
-19 0% -19 0% -20 0% -38 0% -36 0%
distribution cost
Administrative
-192 1% -188 1% -157 2% -124 1% -140 2%
expenses
Other expenses -143 1% -65 0% - 0% - 0% - 0%
Other Income 35 0% 16 0% 25 0% 6 0% 1,007 11%
Profit / (Loss) from 2,995 16% 1,831 13% 829 9% -115 1% 890 10%
Finance cost -1,079 6% -949 7% -1,021 11% -1,373 14% -1,299 14%
Profit / (Loss) before 1,916 10% 882 6% -192 -2% -1,488 -16% -409 -4%
Taxation -632 3% 138 1% 37 0% 277 3% 62 1%
Profit / (Loss) for the
1,284 7% 1,020 7% -155 -2% -1,211 -13% -347 -4%
year
Finance cost: The finance cost decreased to revenue ratio has decreased every year. It was 21% of the revenue in
2013 but reduced to 6% in 2018. It is due to repayment of long term debts and increased in profitability. The
increase in finance cost in 2018 is because of higher exchange loss suffered.
Profit/loss before tax: After losses before tax till 2016, the company improved to get 6% and 10% profit of the
total sales in 2017 and 2018. It is because of increase in gross profit, decrease in cost of sales and finance cost.
Profit/loss after tax: the company has improved from loss of 17% in 2013 to the profit of 7% in 2018. It is because
of increasing gross profit, decreasing cost of sales and finance cost, and increasing profit from operations. After
2013, the company got gross profit but it was too low as compared to the costs and expenses so company faced
loss till 2016. After that, gross profit started increasing as compared to costs. So company is getting profit of approx.
7% in 2017 and 2018. If we look 2016 vertically then profit from operations is 9% of the total sales but finance
cost is 11% thus faced loss of 2% in the end. But in 2017 company has 13% of profit from operations but only 7%
of finance cost thus getting 7% profit in the end.
Summary for vertical analysis:
It can be stated that the cost of sales shows a decreasing trend throughout the 5 years. Although in the beginning
the cost of sales increased but later it was able to cater that loss and managed to reduce it, increasing the profit in
2018. The company earned a profit of 16% in these 5 years on operations. By generating a high ‘other income’ it
earned around 10% profit of the total revenue. Meanwhile in the following year, the company faced a minor loss
due to low gross profit and low other income but later even with high expenses and low other income, the company
was successful in reaching a higher gross profit and low cost of sales which resulted in an overall constant increment
in profit from operations in the later years. The finance cost to revenue ratio decreased throughout due to an
increment in profit and repayment of long term debts. Due to an increment in gross profit and decrement in finance
cost and cost of sales, the company was able to make high profits in 2017-18 after facing losses before tax till 2016.
There was an overall decrement in loss after tax in these five years due to an increment in gross profit and profit

9
from operations and a notable decrement in cost of sales and finance cost. In the beginning, the gross profit was
very low in comparison to costs and expenses which then started increasing.

Balance Sheet:
The balance sheet tables are given in appendix.
Horizontal analysis:
Assets: In 2018, the property and equipment increased by 27%, meaning that the company is going into expansion.
They have used three things for increasing their non-current asset. One is cash and other is their equity and lease
to finance. The cash in current asset decreased by 95% in 2018. This shows that they used their current assets for
growth. The company issued shares increased by 152% in 2017 and 27% in 2018, which means that in these two
years the company has invested in property and equipment. Before 2017, there was no or less shares issued means
the company started to improve its growth after 2016.
Also after 2016, the company sales increased and cost of sales decreased by a large percentage which is discussed
in analysis of income statement. Due to this in 2017, the cash received is much higher. It increased by 1,826% in
2017. The reasons for increase in cash and bank balances is due to the increase in sales and shares issued by the
company. In the year 2017, an increase of 141% is observed in the equity section, making equity a major contributor
to the increase in cash reserves of the company.
The company received their trade debts from debtors. So, the total receivables were reduced in 2018 by 31%
meaning that the company received money but cash shows a decreased of 95%. The decrease in cash us due to the
company investing it in property and equipment which is the sign of future growth. If we see in a trend the decrease
in trade debts was most in 2015 i.e. (60%) and that’s why cash and bank balance is 120% in the same year. The
other receivables also fluctuates throughout the years which means company has good debtors.
Stock in trade also increased throughout the years which means company is buying more and more stock to increase
their production and thus increased their sales. In 2015, stock in trade decreased by 27% which means they were
not able to earn cash. But because of the repayment of trade debts and other receivables, the company received
cash balance and it increased by 120% which was later used to buy more stock in trade. After that in 2016, stock-
in-trade increased by 16% but cash decreased by 66%. This indicates that company used some of its cash for
reducing their non-current liabilities. In 2018, the liabilities reduced up to 5% in which liabilities against assets
decreased by 50%.
Equity: After issuing shares in 2017, the company’s total equity increased by 141% which increased the cash
balance by 1826%. The company also invested in non-current assets. Stock in trade increased by 32% and trade
debts also increased by 32% which lead to an increase in total current assets by 39%.
In 2018, the stock in trade increased to 16% but cash decreased by 95%. In this year, equity also increased by 27%
as discussed earlier that company invested the cash and equity in non-current assets.
The company didn’t issue ordinary shares till 2016 so the change in ordinary shares is almost same. In 2017, the
company’s ordinary shares increased by 152%. In the past years, company only issued preferred shares in which
most of them were cumulative. And in those years, company was not earning a good amount and was in loss before
2015-16. But they had to pay dividends from retained earning so the company faced accumulated losses. In 2017,
company issued ordinary shares and converted its 100% preference shares into ordinary so decreased the
accumulated losses by 36%. The same happened in 2018 in which accumulated losses decreased by 71%.
Non-current liabilities: The Company has continuously decreased their liabilities which is the good sign that
company is growing through their assets and equity only. The long-term finance increased in 2014-15 by 8% and

10
2% only. After that company is decreasing its long term finance every year. Liabilities against assets fluctuates
throughout the years. It increased in 2017 and 2018 and that’s because the company needs to grow.
Current liabilities fluctuates and increased by 246% in 2013. After that it shows slight decrease and increase each
year. Company’s liabilities increased mostly because of creditors, accrued expenses and other liabilities. In 2017,
it decreased by 13% but in 2018, it again increased by 9%.

Summary for horizontal analysis:

Looking at the non-current assets of the company, it can be deduced that the property and equipment has increased
to a great extent and for this increment, it uses more and more cash and equity. This depicts expansion. The cost of
sales shows a decreasing trend while sales and issuance of shares seem to be increasing which results in more cash.
Receivables get reduced on receiving trade debts yet cash is decreasing as the company invests more in non-current
assets. There is an increment in stock in trade as well which depicts there is an increase in production thus an
increase in sales. Issuance of shares increases the total equity which increases cash balance and thus non-current
assets. By issuing ordinary shares and converting all of its preference shares into the ordinary ones, the company
was able to decrease its accumulated losses.
There is a constant decrement in non-current liabilities which shows the company growth is due to its increasing
assets and equity and long-term finance also decreases. Current liabilities are constantly fluctuating due to creditors,
accrued expenses and other liabilities.

Vertical Analysis:
Assets: Each year, non-current assets have more percentage than current asset. And this percentage is increasing
every year. In 2014, non-current assets were 68% and current assets were only 32% of all assets. Then the non-
current assets increased to 73% in 2015. But current asset decreased to 27%. It means throughout the years the
company is concentrating more on its growth. In 2017, current assets increased to 34% of the total assets because
of the increase in cash.
Non-current assets shows an increasing trend throughout the years this is because of increase in property, plant and
equipment as the company is gearing towards its expansion. In the start, the company was financing its property
and equipment. In current assets, stock in trade have high percentage to the total assets and it is increasing through
the years means company is buying more and more stock for their high production and high sales. Stock in trade
was 21% of all assets in 2014, then it decrease to 16%. In 2017 and 2018, it reached to 21% out of all assets.
Trade debts have a very low percentage out of total assets. It is approximately 1% each year have little fluctuation
of increasing and decreasing but overall it is same. In 2015, it decrease but in 2016 it again increase by about 1%.
The same is for other receivables. Other receivables have little fluctuation but it is approximately 1% each year.
Total equity and Liabilities:
Total liabilities have high percentage then total equity in all years whereas in liabilities, current liabilities are more
than non-current. Till 2016, total equity is approximately same for all years. But after 2016, because of the shares
issued and conversion of preference to ordinary shares, the total equity increased to 30% of total equity and
liabilities. And in 2018, it increased to 34% out of 100% in which ordinary shares issued increased to 41%. Those
shares used in long term finance and non-current assets.
The major portion of non-current liabilities are long-term finance which high in past years. The company reduced
long-term finance from 35% to 24% in 2018. This reduction is done through cash sales, shares issued and trade
debts.

11
In the current liabilities, trade and other payables and short term borrowings have high percentages. Current
liabilities fluctuates throughout the years. It was highest in 2014 which was 51% out of which 28% was trade and
other payables and 21% was short borrowings. Company improved it and decreased it to 34% in 2018. The short
term borrowings were have little increase/decrease till 2017 but in 2018, it increases from 13% to 25% which means
the company borrowed money for their operations and inventory. On the other hand trade and other payables
decreased from 20% to 6% in 2018 of all total liabilities and equity.
Overall total liabilities decreased throughout all the years from 84% to 54% which means company is financing
more from assets and equity and trying to reduced its liabilities which is the indication of growth for the company.
Summary for Vertical analysis:
Throughout the 5 year period, there is a greater percentage of non-current assets than current assets with an
increasing percentage every year. This depicts the company is much concerned about its growth. The increment in
the non-current assets is due to because of a growth in property and equipment. There is a higher percentage of
stock in trade in the overall current assets as the company buys more stock for higher production and sales. Among
the lowest are trade debts and other receivables.
There is a higher percentage of total liabilities than total equity in all years and there is a greater amount of current
liabilities than non-current liabilities. The total equity increases after 2016 due to issuance of shares and conversion
of preference to ordinary shares. There is a major portion of long-term finance in the non-current liabilities which
was reduced by cash sales, issuance of shares and trade debts. While in the current liabilities, there is a greater
portion of trade and other payables and short-term borrowings. In 2018, the short term borrowings increased as the
company borrowed more money for operations and inventory while payables decreased. Overall there is an
indication of growth as total liabilities decrease due to the company financing more from its assets and equity.

Ratios Analysis:
Liquidity ratios:
Liquidity Ratios 2018 2017 2016 2015 2014
Current Ratio 0.87 0.97 0.61 0.60 0.64
Quick Ratio 0.25 0.38 0.20 0.23 0.21

Current ratio:
In 2014, the current ratio is said to be 0.64 which means that the short-term debts are greater than the cash
equivalents. However, the current ratio has improved from the previous years, there is an increase in trade debts
and other receivables which means that the volume of sales is stable, but the cash reserves has massively fallen by
more than 50% with a major increase in trade and other payables. In 2015, the current ratio dropped slightly to
0.60. However, with a 40% increase in cash reserves show that the company collected its receivables while there
was an increase in short term borrowings. These loans have been obtained to finance the Company’s working
capital needs and for any other business as may be mutually agreed between the parties. In 2016, the ratio improved
to 0.61. There had been a major increase in the current maturity of long-term finance and on the hand the liquid
assets of the company massively dropped however the trade debts remained stable. This means that the company
does not have enough liquid assets to meet its obligations. This implies that the resources may be tied up in the
working capital of the company and are not use in profitable ways. In this case, the company needs to stop playing
safe and reduce it, to have optimum liquidity position. After 2016 there was a rapid improvement of the ratio in
2017 that is it increased to 0.97. Which means that that current assets were almost equal to the current liabilities.
The company was moving towards stability and had enough liquid assets in hand to meet its obligations especially
the company had massively increased its cash reserves which was due to its rapid increase in sales volume. In 2018,

12
the company again when into decline to the ratio 0.87. This decline was because there was a drop down in the cash
reserves and there was an increase in the current maturity of long-term finance. However, the company meet
increase in the finance cost and the expenses which led to decline in the cash reserves and the company is unable
to overcome its liability. Nevertheless, the company is working towards stability.
Quick ratio:
Quick ratio is also known as acid test ratio. In 2014, the quick ratio was 0.21 which is not equal to 1. This indicates
that the liquid assets of the company are not enough to pay off their current liabilities. During this year, there was
a major decline in the cash balances due the increase in expenses of the company. However, the quick ratio slightly
improved to 0.23 in 2015 which indicates that there was a 60% increase in the cash reserves of the company due
to improvement in sales, but still the company has insufficient liquid assets. The company again dropped to 0.20
as 2013 in 2016. This was because the company increased its current liabilities and on the same time had to bear
more expenses and finance cost which also reduced the company’s liquid asset reserves. There was a rapid increase
in the quick ratio of the company that is 0.38. During this time, the company’s cash reserves increased due to a
massive increase in sales of the company and the company was able to reduce its current liabilities in the small
amount at the same time. It again dropped to 0.25 in 2018. However the company is working well in increasing its
but on the same time the company is not managing its expenses due to which there is increase in the expenses and
finance cost which has reduced the cash reserves of the company due to which the company is not able to meet up
its current liabilities which is a bad sign for the stability of the company. This may indicate that the company relies
too much on inventory or other assets to pay its short-term liabilities.
Summary for Liquidity ratio:
There is an improvement in the overall liquidity ratios over the years. This is due to the improvement in the sales
volume and increase in profit. The operational efficiencies have also been improved. However, the company does
not have enough liquid assets to overcome its current liabilities which means that it has to use its noncurrent assets
as per requirements. There has been a minor decline in the liquidity ratio in the current year. This is because there
is an increase in the short-term borrowings and their expenses and finance cost is not controlled due to which they
are increasing.

Efficiency ratios:
Efficiency Ratios 2018 2017 2016 2015 2014
Asset turnover 0.93 0.77 0.63 0.62 0.57
Inventory turnover 3.88 3.67 3.30 3.27 3.24
Inventory turnover(days) 93.98 99.40 110.66 111.63 112.48
Debtor’s turnover 146.74 122.72 125.94 70.84 48.35
Debtor’s turnover(days) 2.49 2.97 2.90 5.15 7.55

Asset turnover:
The asset turnover ratio has improved over the years. In 2014, the asset turnover ratio was 0.57 that is it had
increased from 2013. As the company worked to improve its operating assets it resulted in an increase in net sales
which means that the company is using its assets efficiently. There was a slight increase in the net sales in 2015 to
0.62. This was due to increase in the gross revenue in which was increased by 10% to the dealers. However, the
company failed to maintain the improvement of the plant, machinery and equipment but there was an increase in
the deferred taxation and there was a major increase in the cash reserves of the company. There was a minor
increase in 2016 to 0.63. This minor increase was due to increase in stocks which also resulted in more improvement
of sales. The asset turnover drastically increased in 2017 and 2018. It increased to 0.77 in 2017, this rapid increase
was because the company worked on its operating assets and on the same time there was a major increase in their

13
cash reserves which means that they received their collectibles. Asset turnover rapidly improved to 0.93 which
means that it is using its assets efficiently in its operations. It rapidly increased because the company kept on
working on their operating assets to produce efficiently and effectively which resulted in massive increase in net
sales of the company. Looking at the overall asset turnover ratio indicates that the company is using its assets
efficiently and working on to improve its problems in production.

Inventory turnover/days:
2018: 3.88 times; 93.98 days
2017: 3.67 times; 99.40 days
2016: 3.30 times; 110.66 days
2015: 3.27 times; 111.63 days
2014: 3.24 times; 112.48 days
In the year 2014, the inventory turnover rate was 3.88 times meaning that the company was able to sell its inventory
every quarter and it took them about 112.48 days on average to sell their inventory. In the next year 2015, the
turnover rate shows a slight increase whereas there is a slight decrease in the number of days it took them to sell
their inventory.
An increasing trend can be observed in the inventory turnover rate starting from the year 2014 to 2018. The turnover
rate has increased from 3.24 to 3.88 times in 2018, which shows that the company is becoming more efficient in
selling their inventory. The more the turnover rate, the higher the sales and the less time inventory stays on the
shelves.
This is further supported by the decreasing trend observed in the number of days it took to sell their inventory. In
2014, it took 112.48 days whereas in 2018, it took those about 93.98 days to sell their inventory. This indicates
higher sales and better management of the inventory of the company making their financial position more stable
and stronger.

Accounts receivable turnover/days:

2018: 146.74 times; 2.49 days
2017: 122.72 times; 2.97 days
2016: 125.94 times; 2.90 days
2015: 70.84 times; 5.15 days
2014: 48.35 times; 7.55 days
In 2014, the turnover rate of accounts receivable was 48.35 times, and the number of days it took the company to
complete the cycle was 7.55 days. The next year, that is 2015, the turnover ratio increased from 48 to 70.8 times
whereas the number of days decreased from 7.5 to 5.15 days. Although, in 2017, a slight increase in the inventory
turnover days can be observed as compared to the previous year.
From the year 2014 to 2018, an increasing trend can be seen in the turnover rate as it increased from 48.35 to 146.74
times. This shows that the company is becoming more efficient in collecting the receivables from their creditors.
This in turn means that the company is becoming more cash rich and highly liquid.

14
On the other hand a decreasing trend can be seen in the number of days it takes for the company to convert its
receivables to cash. This further supports the fact that the company’s financial position is becoming more stable
and stronger. A low number of days and turnover rate also shows the company’s reliability and credibility to the
investor.

Summary of efficiency ratios:

Overall the company has improved its performance dramatically over the period of five years. It has reduced their
operating cycle by effectively using its assets, managing and selling its inventory and in collecting their receivables
on time.

Marketability ratios:
Marketability Ratios 2018 2017 2016 2015 2014
Price earnings ratio 10.04 10.39 (6.26) (1.62) (5.48)
Basic earnings per share 1.57 1.74 (1.35) (4.97) (1.62)
Price to BV ratio 1.64 1.99 10.68 5.96 1.33

Price earnings ratio:

From 2014 to 2016, the company reported negative price to earnings ratio. This indicates that the company wasn’t
performing well to earn enough per share. Lower ratios indicate poor current and future performance of the
company. In 2015, this ratio improved from -5.48 to -1.62 but in the following year this reduced to -6.26. A drastic
improvement can be seen in 2017 and 2018. In the two years the stocks had started trading at multiple of ten. This
also means that the investors are willing to pay ten dollars for every dollar earned.
In 2017 particularly, the price to earnings ratio seems to be the highest in all the five years with the stocks trading
at 10.39 times the earnings. This is due to the company going into expansion. The investors buy more of the shares
in expectations of a future pay off from the company’s investment. Another contributor to this good turnover is the
company paying off their most of their debts.
Dividend yield:
In the past five years, the company haven’t paid any dividends to its shareholders. Hence, dividend yield ratio
cannot be applied.
Basic earnings/per share:
From 2014 to 2016, the company suffered a loss which kept on increasing and decreasing in earning per share. This
is because the company has fewer liquid assets in the form of cash and receivables available to reinvest in the
expansion of the business or to pay dividends to the stakeholders. As the shares increased in 2017-2018, the inflow
of cash increased and went into stage of expansion which also resulted in improvement of operations which led to
increase in sales volume and earning per share.
Price to book value ratio (times):
From 2014 to 2016, the company shows an increasing trend which means that the value of the share has been
increased as the condition of the company was improving and an increase in profits and sales volume. The investors
in market are willing to pay premium for the company above its hard assets. However, there was a major decline

15
in 2017 and 2018 that is the ratio dropped to 1.99 and 1.64 respectively. This rapid decline was because there was
a decrease in share price because of the under-performance of the stock market.
Summary for marketability ratio:
During the past five years there have been an increase in the investments made by the investors as the company is
going towards expansion. This in turn increased the price earnings ratio and price to book value. Making them
financially strong and stable. However, in the recent years the price to book value has decreased due to the decline
in the performance of the stock market.

Leverage:
Leverage Ratios 2018 2017 2016 2015 2014
Debt ratio 58.42% 63.15% 82.70% 81.67% 84.43%
Debt to equity ratio 0.6% 0.7% 2.2% 2% 2.2%
Interest coverage ratio 2.78 1.93 0.81 (0.08) 0.69

Debt ratio:
The company is a capital-intensive industry which requires high amount of investments so the company had
maintained relatively high debt ratio of around 80% from 2013 till 2016. In 2013, the company had a debt ratio of
84.30% which was majorly increased to 84.43% in 2014, indicating that the company had extensive use of leverage.
Large proportion of financing was made by creditors for the company to run capital working needs. The reason
was obviously due to the large amount of loans and long-term finance and very low return of assets received which
worsened in the next year 2015, but decrease in liabilities and assets made it to maintain 81.67% in 2015. It
increased in the next year due to increase in liabilities, still a low return on assets and a high amount of financing
loans from creditors which was 82.7% in 2016. However, the company’s financial position improved in 2017 as it
managed to generate profit from its operations via utilizing assets and was decreased to 63.15%. Which had a
further reduction in 2018 and was 58.42%. This shows that company has improved in financing debt from assets
rather than debts.

Debt to equity ratio:

The company maintained a high debt to equity ratio of around 2 from 2013-2016. In 2013, it had a high debt to
equity ratio of 2.7% but reduced slightly to 2.2% in 2014, showing that the company’s financing for the purpose
of growth came more from the creditors rather than investors. In 2015, the company experienced a slight decrease-
increase in debt and shareholder’s equity respectively which was 2%, yet still taking more from creditors. This was
due to high loss occurred. In 2016, the ratio was as similar as it was in 2014, a result of increase in the rates of
long-term creditor loans than investor’s. Now in 2017, the debt to equity ratio improved actively going below 1%.
Debt to equity ratio was reduced to 0.7% in 2017 primarily due to the abundant increase in share capital and also
the substantial increase in return on assets. The improvement continued in 2018 and the ratio stood 0.6%. This
indicates that the company is more financially stable now with better ability to pay obligations.

Interest coverage ratio:

The company’s interest coverage was not good as it was below 1 times since 2013 till 2016. Which means that the
company’s ability to make interest payments on its debts was poor. The company managed to maintain a very poor

16
interest coverage ratio of 0.25 in 2013 which had a slim increase in 2014 and was 0.69. Now in 2015, the ratio had
a major drop of 0.08. This was a result of high amount of finance costs and drastically low return on assets during
the year. This indicated that company was unable to pay loans in future and also was a reason for the loss and low
profitability. In the year 2016, it improved a bit and was 0.81 times, however, as the company was still borrowing
from creditors, the interest rates might be high and company was still at loss. Now in 2017, the interest coverage
ratio got a boost and it stood 1.93 times which very close to the generally strong considered ratio of 2. This set
company’s trajectory towards growth as it made the investors see that the company is safe to invest in i.e. they can
manage to pay interest and debts well enough from income generated. In 2018, the ratio significantly rose up as a
result of abundant increase in revenue which was enough to cover up the debts and interest. The ratio in 2018 was
2.73 times, excellent sign for the company’s growth.

Leverage summary:
The ratios discussed in this analysis are interrelated and also depend on other ratios such as rate of return on assets.
Overall, the company was locked in unfavorable effects of leverage for a few years 2014-2016. The company could
have benefitted if rate of return on assets was greater than rate of interest paid to creditors. But, it was return on
assets was less than interest paid to creditors as the company had high loans and occurred a loss. However, as the
company’s revenues increased in 2017, it continued to maintain a good interest coverage ratio and had the ability
to finance debts from either equity or income, it attracted investments which had the company in growth phase.

Profitability:
Profitability Ratios 2018 2017 2016 2015 2014
Gross profit margin 17.53% 14.83% 10.17% 0.43% 0.64%
Net profit margin 6.79% 7.25% -1.61% -12.76% -3.75%
Return on asset 6.29% 5.61% -1.01% -7.90% -2.13
Return on equity 15.12% 15.22% -5.84% -43.08% -13.69%

Gross Profit Margin:

The company was suffering loss before 2014. The company’s gross margin rate had increased to 0.64% resulting
in profit due to increase in sales. But their revenue was less than their cost of sales. In 2015, the profit experienced
a slight decrease and resulted in the gross profit of 0.43%. This decrease was because the cost of sales had increased.
And if a manufacturer has to pay higher prices in generating sales, it suffers reduced gross margin rate. In 2016,
there was a drastic increase in the gross margin rate which was increased to 10.17%. Because the company managed
a huge decrease in the cost of sales. After they managed to reduce their cost of sales their gross profit rate continued
to increase in 2017 (14.83%) and 2018 (17.53%), as they could not manage to reduce the cost of sales consistently,
the profit margin rate was not as high as compared to 2016. High gross margin rate means that company has more
to cover for operating, finance, and other costs.
Net profit margin:
In 2014, the company’s net profit margin was -3.75% as there was indeed an increase in revenue but the increment
of cost of sales and the expenses such as administration, selling and distribution cost, and finance cost was much
more than company’s revenue. In 2015, company experienced a drastic increase in loss, more than previous year,
which was -12.76%. Reason of this was the major increase in finance cost during that year. The loss reduced to -
1.61% in 2016 due to the slight increase in revenue generated and also a slight reduction was experienced in cost
of sales. The company managed to control their expenses and there was a major decrease in finance cost. In 2017,
the company saw net profit margin of 7.25%. As there was 30% increase in revenue which resulted in 70%

17
increment in profit. The company stabled its expenses. In 2018, there was almost a percent decrease in net profit
margin which is 6.79%. This happened as their costs increased in finance and sales. Overall their net profit margin
is quite good suggesting that this company manages its expenses relative to its net sales.
Return on asset:
The company had a bad return on assets which was in negative till 2016. In 2014 the company received return on
assets of over -2.3% due to the loss occurred. Return on assets worsened in 2015 and had drastic decline to -7.7%
which is considerably very bad for the company as it shows that company did not manage to utilize the money used
to purchase assets, investments in other words, into profits. This was due to a decrease in total assets, the high loss
occurred in 2015 and high long-term finance loans. Also, a very low interest coverage ratio and high finance cost
was instrumental. This was one of the major reasons as to why the company borrowed more from creditors rather
than investors during that time. Now in 2016, return on assets started to improve and was -1% this was because of
a decrease in costs such as finance costs and cost of sales plus the increase in revenue, total assets and reduced loss
were also functional in this. In 2017, the company experienced growth and return on asset had a major increase of
6.1%. This was due to the significant increment in sales and ample management of costs as a result also gross profit
also increased. Total assets were increased which improved the company’s financial position. This was an indicator
for investors that the company is effective in converting the money invested in profit, thus attracting more
investments than loans. This was the reason that the company continued to grow in 2018 with return on assets rate
of 6.7%. Now this tells us that company can pay debts with their own income due to high return on assets as a
result of generating profits from assets.

Return on equity:
In 2014, the return on equity was -13.69% which was very bad and that means the company was only making the
profits from investment and that could lead to the losses. It was also very low in 2015. But after that the company
started improving in 2016 and got -5.85% of return on equity means that much profit earned through investment.
Now in 2017, the company improved its return on equity to about 15.22% which means now company is earning
the more profits internally. And in 2018, the company’s return on equity is highest which about 15.12% is. This
range of return on equity attracts the investors because the company is more earning from the sales and can use
equity in investment.

Profitability Summary:
The profitability ratios reflects steady growth over the years. Sales and profits have continuously improved each
year. So throughout the years company manages to increase their sales and reduce the cost of sales. But because of
the high other costs, the company couldn’t get high net profit margin for many years. In recent years, company
managed to increase their sales and reduced their cost so got high net profit margin. Meanwhile company had bad
return on assets due to high liabilities and less assets. This is mainly because of company was relying on creditors
more than investors so couldn’t manage to finance their assets but after 2016, company increased their sales and
investors attracted towards the company. The company is now earning more profit internally and uses equity in
investment so having high return on equity.

18
Conclusion:
Our report finds a conclusion that the company’s financial outlook was very poor in previous years
before the growth in 2017 which continued in 2018. The poor performance in past of the company is still evident
from the current analysis which shows relatively low ratios such as quick, debt, interest coverage etc. However,
presently the company is quite solvent which means that it is able to pay off its liabilities at the time of liquidity of
the firm. Company is generating ample return on its equity and assets but it is not creating value for its shareholders
as it not paying the previous dividends to them due to this, the motivation of an investors get affected and they
might refuse from investing in the firm.

Recommendations:
 The company should improve its utilization of fixed asset for better productivity which will result in high
profits.
 It should manage and control its high finance cost and other expenses in order to increase its revenue.
 The company should work on its liquid assets to cover its current liabilities.
 Aisha steel mills, like other major steel producers, should prepare to meet and make the most of increase in
supply demand related to the upcoming infrastructure projects in Pakistan.

Appendix:
The appendices include the tables for horizontal and vertical analysis of Balance sheet in the next page.

19
Balance Sheet 2018 2017 2016 2015 2014

RS in RS in RS in RS in RS in
Horizontal analysis % % % %
Million Million Million Million Million
property, plant and equipment 13,373 27% 10,542 9% 9,689 -3% 9,996 -2% 10,219
intangible 7 -22% 9 -17% 11 -15% 13 -13% 15
long term loans and advance 4 100% 2 -24% 3 13% 3 0% 3
long term deposits 47 2% 46 0% 46 -3% 48 0% 48
deferred tax 932 -31% 1,358 20% 1,134 2% 1,110 53% 724
Total non-current assets 14,366 20% 11,958 10% 10,884 -3% 11,170 1% 11,009
stores and spares 112 17% 96 -47% 181 11% 163 3% 159
stock in trade 4,312 16% 3,715 32% 2,814 16% 2,434 -27% 3,347
trade debts 105 -31% 152 98% 77 1% 76 -60% 192
advances, deposits 405 -23% 525 36% 387 25% 309 272% 83
other receivables 145 4% 139 -2% 142 -38% 228 -55% 502
tax refund due from
247 -17% 299 -14% 351 -29% 493 4% 472
government
taxation-payments less
685 58% 434 -8% 473 42% 332 -27% 456
provision
cash and bank balance 45 -95% 861 1826% 45 -66% 132 120% 60
total current asset 6,059 -3% 6,225 39% 4,468 7% 4,167 -21% 5,272
total assets 20,425 12% 18,183 18% 15,352 0% 15,337 -6% 16,281
ordinary shares 8,322 21% 6,856 152% 2,717 0% 2,711 0% 2,710
cumulative preference shares 472 - 472 -81% 2,440 0% 2,446 236% 729
difference on conversion of
cumulative preference shares -1313 -39% -2,171 100% -
into ordinary shares

subscription money against

- -100% 2,176 100% -
rights issue

accumulated loss 548 -71% 1,858 -36% (2,884) 5% (2,737) 79% -1,533
surplus on revaluation of
1,557 27% 1,224 221% 382 -2% 391
fixed assets
total equity 6,934 27% 5,476 141% 2,273 -6% 2,420 27% 1,906
long term finance 4,848 -4% 5,032 -5% 5,320 -5% 5,597 2% 5,484
liabilities against assets
33 725% 4 25% 4 -50% 8 60% 5
subject to finance leases
staff retirement benefit 51 28% 40 32% 31 35% 23 51% 15
non-current liabilities 4,933 -3% 5,077 -5% 5,355 -5% 5,628 2% 5,504
trade and other payables 1,209 -66% 3,561 28% 2,773 1% 2,744 -40% 5
accrued mark-up 238 52% 157 -19% 196 -26% 265 -7% 284
short term borrowings 5,045 107% 2,434 -37% 3,870 0% 3,876 15% 3,369
current maturity of long term
500 100% 2 -47% 3 0% 3 -40% 4,574
finance
current liabilities 7,001 9% 6,405 -13% 7,342 6% 6,898 -16% 8,242
total liabilities 11,934 4% 11,483 -10% 12,697 1% 12,526 -9% 13,746
total equity and liabilities 20,425 12% 18,183 18% 15,352 0% 15,337 -6% 16,281

20
Balance Sheet 2018 Vertical 2017 2016 2015 2014
RS in RS in RS in RS in RS in
Vertical analysis % % % % %
Million Million Million Million Million
property, plant and
equipment
13,373 65% 10,542 58% 9,689 63% 9,996 65% 10,219 63%
intangible 7 0% 9 0% 11 0% 13 0% 15 0%
long term loans and
advance
4 0% 2 0% 3 0% 3 0% 3 0%
long term deposits 47 0% 46 0% 46 0% 48 0% 48 0%
deferred tax 932 5% 1,358 7% 1,134 7% 1,110 7% 724 4%
Total non-current assets 14,366 70% 11,958 66% 10,884 71% 11,170 73% 11,009 68%
stores and spares 112 1% 96 1% 181 1% 163 1% 159 1%
stock in trade 4,312 21% 3,715 20% 2,814 18% 2,434 16% 3,347 21%
trade debts 105 1% 152 1% 77 1% 76 0% 192 1%
advances, deposits 405 2% 525 3% 387 3% 309 2% 83 1%
other receivables 145 1% 139 1% 142 1% 228 1% 502 3%
tax refund due from
government
247 1% 299 2% 351 2% 493 3% 472 3%
taxation-payments less
provision
685 3% 434 2% 473 3% 332 2% 456 3%
cash and bank balance 45 0% 861 5% 45 0% 132 1% 60 0%
total current asset 6,059 30% 6,225 34% 4,468 29% 4,167 27% 5,272 32%
total assets 20,425 100% 18,183 100% 15,352 100% 15,337 100% 16,281 100%
ordinary shares 8,322 41% 6,856 38% 2,717 29% 2,711 18% 2,710 17%
cumulative preference
shares
472 2% 472 3% 2,440 16% 2,446 16% 729 4%
difference on conversion
of cumulative preference
shares into ordinary
-1313 6% -2,171 12% -
shares
7,481 37% 5,157 28%
subscription money
against rights issue
- - 2,176 12% -
7,481 37% 7,333 40%
accumulated loss 548 3% 1,858 10% -2,884 19% -2,737 18% -1,533 9%
surplus on revaluation of
fixed assets
1,557 8% 1,224 7% 382 2% 391 3% 1%
total equity 6,934 34% 5,476 30% 2,273 15% 2,420 16% 1,906 12%
long term finance 4,848 24% 5,032 28% 5,320 35% 5,597 36% 5,484 34%
liabilities against assets
subject to finance leases
33 0% 4 0% 4 0% 8 0% 5 0%
staff retirement benefit 51 0% 40 0% 31 0% 23 0% 15 0%
non-current liabilities 4,933 24% 5,077 28% 5,355 35% 5,628 37% 5,504 34%
trade and other payables 1,209 6% 3,561 20% 2,773 18% 2,744 18% 5 0%
accrued mark-up 238 1% 157 1% 196 1% 265 2% 284 2%
short term borrowings 5,045 25% 2,434 13% 3,870 25% 3,876 25% 3,369 21%
current maturity of long
term finance
500 2% 250 1% 3 0% 3 0% 4,574 28%
current liabilities 7,001 34% 6,405 35% 7,342 48% 6,898 45% 8,242 51%
total liabilities 11,934 58% 11,483 63% 12,697 83% 12,526 82% 13,746 84%
total equity and liabilities 20,425 100% 18,183 100% 15,352 100% 15,337 100% 16,281 100%

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