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COMSATS Institute of Information

Technology
Department of Management Sciences

FINANCIAL MANAGEMENT
Final Project Report

Submitted To:
Sir Khalid Sohail
Submitted By:
UBAID ULLAH JAN FA09-
MBE-021
Mian Murtaza Shahid FA09-MBE-011
Salleha Satti FA09-MBE-020
Umer Naseh FA09-MBE-014
Inam Ullah FA09-MBE-006

DATE: 10.01.11
The Exordium

“In the Name of Allah the


compassionate the Merciful”

All the acclamation and admiration is for


Almighty Allah the most merciful, gracious and
beneficent who is entire source of all the
knowledge and wisdom endowed to mankind.
We offer our humblest thank from the core of
our heart to Holy Prophet Muhammad (Peace
Be Upon Him), who is forever source of
guidance and knowledge for the humanity.

“Praise to Allah, Lord of the creation, the


Compassionate, the Merciful, the King of the
Judgment day! Alone.” (Al Quran)

ACKNOWLEDGEMENT
First of all we are thankful to Almighty
ALLAH for giving us much cooperation and
supporting parents who have given us this
opportunity to study in COMSATS. I would like

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to thanks Sir Khalid Sohail for giving us the
confidence and opportunity to prove ourselves.

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The Business policy of the company is based on the principles of honesty, integrity and
professionalism at every stage.

Product Quality:

Regularly update ourselves with technological advancements in the solid of cement production
to produced cement under highest standards and maintain all relevant technical and
professional standards.

Dealing with Employees:

Provide congenial work atmosphere where all employees are treated with respect and dignity.
Recognize and reward employees based on their performance and their ability to meet goals
and objectives.

Responsibility to interested parties:

To be objective, fair and transparent in our dealings with people who have reposed their
confidence in U.S.

Financial Reporting & Internal Controls:

To implement an effective and transparent system of financial reporting and internal controls
to safeguard the interest of our shareholders and fulfill the regulatory requirements.

Procurement of Goods & Services:

Only purchase goods and services that are tailored to our requirements and are priced
appropriately. Before taking decision about procurement of any good or service, obtain
quotation from various sources.

Conflict of Interest:

All the ads and decisions of the management to be motivated by the interest of the company
and activities and involvements of the directors and employees in no way conflict with the
interest of the company.

Adherence to laws of the land:

To fulfill all statutory requirement of the Government and its regulator bodies and follow
relevant and applicable laws of the country.

Environmental Protection:

To protect environment and ensure health and safety of the work force and well- being of the
people living in the adjoining areas of our plant.

We recognize the need for working with optimum efficiency to attain desired levels of
performance. We endeavor to conduct our business with honesty and integrity and produced

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and supply cement with care and competence, so that that customer
receive the quality they truly deserve.

Board Of Directors

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-:Different Competitors of Charat Cement:-

THCCL Thatta Cement


PIOC Pioneer Cement
MUCL Mustehkam Cement
MLCF Maple Leaf Cement
KOHC Kohat Cement
JVDC Javedan Cement
GWLC Gharibwal Cement
FLYNG Flying Cement
FECTC Fecto Cement
FCCL Fauji Cement
DNCC Dandot Cement
DGKC D.G.K.Cement
DCL Dewan Cement
DBCI Dadabhoy Cement
BWCL Bestway Cement
ACPL Attock Cement
AACIL Al-Abbas Cement

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Financial Information & Decision Making:
Financial statement is about the company’s account, which they produce at the
end of every trading year. The balance sheet and income statement (profit and loss
accounts) are the main part of financial statements. Financial information provides
invaluable statistics and evidence on which company can make decisions and plans for
future.
The stakeholders have great concern about these financial statements
(Stakeholders are all those who are directly or indirectly related to the operations of the
organization).These stake holders are tax authority, management, customers, employees,
bank, competitors etc.
Tax Authority:
They are interested in the income of the organization (after payment of interest) in
order to charge tax accordingly.
Management:
The management uses the financial statements for financial assessment of the
company. A management responsibility requires to cut costs or to make other finance
related decisions.
The Employees:
The employees are interested in the financial statement of the company to know
about the real profit, so that they may claim for their bonuses and fringe benefits etc from
the company.
Share Holders:
Shareholders are also interested to know about the real earnings from the study
of financial statement of the company for their claims of dividends.
The Creditors:
The Creditors are interested in the financial statements of the company to know
about the financial position of the company for their re-payment of loans.
A financial statement provides information that is otherwise not available from the

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general study of the accounts of a company. This statement must be supplemented with
other information also, which includes company’s management, investment advisors and
trade associations etc. The finance department of a company generates a variety of
information that is very useful and help out company as well as stake holders to make
decisions, it includes:

• Profit and Loss accounts:


Profit and Loss of the company of the company, information is provided whether
the business is making efficient use of financial resources or not.

• Balance Sheet information:


Balance Sheet of the company provide details of business assets and liabilities, as
well as the liquidity of the business.

• Sales and purchases information:


Sales and purchases information provides details about particular type of trading
and accounts with particular customers and suppliers.
• Information about the purchase of assets and liabilities.
• Information about the wages paid out by a business.
• Information about costs.
By providing a steady and up-to-date flow of information, a business organization
is able to make appropriate decisions about how to reduce costs and increase sales, when
to raise profitability and purchase new capital assets and which is the best sources of
finance and duration etc. and the same is true for stakeholders also. Financial is an
important process to help you determine the efficiency, effectiveness, and stability of
your organization.

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MAJOR CONTENTS OF BALANE SHEET AND
INCOME STATEMENT IN 2009 & 2010
Balance Sheet 2010 (Rs. “000”) 2009 (Rs. “000”)
Current Assets 1,239,483 1,343,431
Inventory 201,186 280,588
Quick Assets 1,038,297 1,062,483
Accounts Receivable 25,467 16,437
Total Assets 4,857,419 4,743,510
Current Liabilities 1,622,417 1,070,994
Total Debt 2,611,454 2,475,106
Shareholder’s Equity 2,245,965 2,268,404
Net Worth / 3,235,002 3,672,516
Capitalization

Income Statement 2010 (Rs. “000”) 2009 (Rs. “000”)


Net Sales 3,469,111 4,567,409
Cost of Goods Sold 3,379,937 3,896,647
Gross Profit 89,174 670,762
Net Profit & Loss (13,755) 159,287

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Classification of Ratios
Different ratios are used for different purposes; these ratios can be grouped into various
classes according to the financial activity. Ratios are classified into four broad categories.
• Liquidity Ratio
• Leverage Ratio
• Profitability Ratio
• Activity Ratio
• Market Value Ratio

Liquidity Ratio
Liquidity ratio measures the firm’s ability to meet its current obligations i.e. ability to
pay its obligations and when they become due. Commonly used ratios are:
• Current Ratio
• Acid Test Ratio or Quick Ratio
• Working Capital

1. Current Ratio:
These are most widely used measure of short term debt paying ability is the current ratio.
This ratio is computed by dividing current assets by total current liabilities.
The higher the current ratio, the more liquid the company appears to be. It is believed
that a current ratio of at least two or greater quality as a good credit risk.
Current Assets
Current Ratio =
Current Liabilities

Year 2010 2009


Current Assets 1,239,483 1,343,431
Current Liabilities 1,622,417 1,070,994
Current Ratio 0.77 1.25

1. Quick Ratio:

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Inventories and prepaid expenses are least liquid assets. It take many month to
convert inventory into cash. Quick ratio include cash, accounts receivables, marketable
securities i.e. short term investments that can be converted quickly into cash. It is
believed that a quick ratio of at least one or greater qualify as a good credit risk.

Quick Assets
Quick Ratio =
Current Liabilities

Year 2010 2009


Quick Assets 1,038,297 1,062,483
Current Liabilities 1,622,417 1,070,994
Quick Ratio .6399 .9924

Leverage Ratio/Debt Ratio


If a business fails and must be liquidated, the claim of creditors takes priority over those
of owners, but if the owner has great deal of debt, there may not be enough assets even to
make full payment to all its creditors. A basic measure of creditors claim is the debt ratio,
which states total liability as a percentage of total assets.

1. Debt to Total Asset Ratio:


The debt to total assets ratio is divided by total debts by total assets. The higher the debt
to asset ratio, the greater the financing made by the creditors during any fiscal or
financial period.

Total debts
Debt to total asset ratio: X 100
Total assets

Year 2010 2009


Total debts 2,611,454 2,475,106
TOTAL ASSETS 4,857,419 7,743,510
Debt to total assets 53.76% 31.96%

2. Debt to Equity Ratio:

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To assess the extent to which uses borrowed money, we use debt to equity ratio.
The higher the ratio the higher the level of firm’s contribution that is being provided by
shareholders. The larger the creditor’s cushion in event of shrinking values or assets
losses.

Total debts
Debt to equity ratio: X 100
Equity

Year 2010 2009


Total debts 2,611,454 2,475,106
Total Shareholder’s equity 2,245,965 2,268,404
Debt to equity ratio 116.27% 109.11%

3. Long term debt to capitalization:

Year 2010 2009


Long term 989,037 3,325,002
debt

Total 1,404,112 3,672,516


Capitalization

.3058 .3824

Profitability Ratio
Profitability ratios are used to determine that how much company revenues is eaten up by
expenses. How much a company earns relative to sale generated and the amount earned
relative to firm’s total assets.

Types of Profitability Ratio:

1. Gross Profit Margin:


The gross profit margin measures how much gross profit remains out of each sales dollar
after the cost of goods sold is subtracted. The higher the gross profit margin ratio, the

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better the sales cost control compared to its sales revenue. This ratio shows how well a
firm generates revenue compared to its sales revenue.

Gross Profit
Gross Profit Margin: X 100
Sales

Year 2010 2009


Gross profit 89,174 670,762
Net sales or revenue 3,469,111 4,567,409
Gross profit ratio 2.57% 14.69%

2. Net Profit Margin:


Net profit margin measures how much net profit out of each sales dollar is left after all
the expenses are subtracted i.e. operating expense, interest and taxation etc.

Net Profit
Net Profit Margin: X 100
Sales

Year 2010 2009


Net profit or loss (13,755) 159,287
Net sales or revenue 3,469,111 4,567,409
Net profit/loss ratio (39.65%) 34.9%

3. Return on Assets (ROA):


Return on assets indicates or measures overall effectiveness in generating profits with
available asset.
Net Profit after Tax
Return on Assets:
Total Assets

Year 2010 2009

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Net Profit After Tax or (13,755) 159,287
Loss
Total Assets 4,857,419 7,743,510
Return on assets (.0028) .0336

4. Return on Equity (ROE):


Return on equity measures the average return on the firm’s capital contribution from its
owners.

Net Profit or Loss


return on Equity:
Shareholder’s Equity

Year 2010 2009


Net profit (13,755) 159,287
Total owner’s equity 2,245,965 2,268,404
Return on equity (.0061) .0702

Asset Activity Ratios


Asset activity ratios measures how effectively and efficiently the business has utilized the
current assets.

Types of Activity Ratios:


1. Account Receivables Turnover Ratio:
Account receivables turnover rate shows that how many times, the business has recovered the
outstanding amount from its credit customers.

Net credit Sales


Account receivables turnover rate:
Account receivables

Year 2010 2009


Net Credit sales/ sales 3,469,111 4,567,409
Accounts receivables 25,467 16,437
Account Receivable Turnover 13.62 27.77
Ratio

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• Account Receivables Turnover Rate in days:
It indicates the days taken to collect account receivables.

Days in a Year (360 or 365)


Account receivables turnover rate in days:
Account Receivables Turnover Rate

Year 2010 2009


Days in year 365 365
Account Receivable Turnover Ratio 13.62 27.77
Collection Period 27 Days 14 days

2. Inventory Turnover Rate:


Inventory turnover rate measures the number of times inventory is being sold.

Cost of goods sold


Inventory turnover rate:
Average inventory

Year 2010 2009


Cost of goods sold 3,379,937 3,896,647
Inventory(stores and spares) 201,186 280,588
Return on equity 16.80 13.89

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