LUCKY CEMENT LIQUIDITY RATIOS A fully liquidity analysis requires the use of cash budgets, but by relating the

amount of cash and other current assess to current obligations, ratio analysis provides a quick, easy-touse measure of liquidity. 2006 Current ratio= Current Asset Current Liabilities

= 4455494000 4752035000 Current ratio = 0.94 times 2007 Current ratio= Current Asset Current Liabilities = 5402678000 6352556000 Current ratio= 0.85 times 2008 Current ratio=1.09 times 2009 Current ratio= 0.86 times 2010 Current ratio=0.71 times ANALYSIS: Although in both years the position of the company to pay off its short term debt is not very good. It is necessary for the company that its current ratio remains above 1 time to meet its short term obligations and in the case of lucky cement the current of year 2007 is declining because the short obligations (liabilities) are increasing at a faster pace than its current assets. 2006 Quick ratio= Current Asset- Inventory Current Liabilities = 4455494000 - 431418 000 4752035000 Quick ratio= 0.85 times 2007 Quick ratio= Current Asset- Inventory Current Liabilities = 5402678000-676256000 6352556000 Quick ratio= 0.75 times 2008 Quick ratio=1.00 times 2009 Quick ratio=0.73 times 2010 Quick ratio=0.65 times ANALYSIS Here the Quick Ratio of year 2007 is declining because company is holding huge amount of inventory as compared previous year. The quantitative sales of company in year 2007

is 4.64 mtpa against the last year sale of 2.2 mtpa because there is a growth in Pakistani cement industry and there is overall an increase in sale of the cement so thats why there is a need to hold much bigger amount of inventory as compared to year 2006 and the quick ratio of both years is less than 1. ASSET MANAGEMENT RATIO Asset Management Ratio tells us how efficient company utilizes its total assets for generating sales. 2006 Inventory turnover = Sales Avg inventory = 4,286,138,000 490,887,000 Inventory turnover= 18.54 times 2007 Inventory turnover = Sales Avg inventory = 3, 463, 283000/ 479828000 Inventory turnover= 15.97 times 2008 Inventory turnover=18.18 times 2009 Inventory turnover=17.33 times 2010 Inventory turnover=18.31 times ANALYSIS: Inventory Turnover Ratio indicates the effectiveness of the inventory management practices of the firm. The inventory turnover of year 2007 is less than the inventory turns over of year 2006; inventory turnover ratio of year 2006 was 8.731 times which indicates that 8.731 times in a year the inventory of the firm is converted into receivables or cash. However, in 2007, the inventory turnover ratio increased to 7.21 times. This was due to the fact that the company, in 2007, the sales of the company decreased. 2006 Average collection period = Account Receivable * 365 Sales Account Receivables = Trade debts+ other receivables = 25, 475000+70, 339000 = 95814000 Average collection period = 95814000 * 365 4,286,138000 Average collection period = 8.15 days

2007 Average collection period= Account Receivable * 365 Sales Account Receivables = Trade debts+ other receivables = 19, 558000+858, 758000 = 878316000 Average collection period = 878316000 * 365 3,463,283000 Average collection period = 92.56 days 2008 Average collection period = 2009 Average collection period = 2010 Average collection period = ANALYSIS: Credit policy is defined as the maximum time period allowed to the customer to pay back.The average collection period in the year 2006 was 8.15 days which means that the firm is able to collect its receivables within approximately 9 days. However, in 2007, the average collection period increased to 93.56 days, thus now the company is collecting its receivable within approximately 94 days. There could be many reasons for this increase in average collection period such as, problem in management, lack of incentive given to its customers or undependable customer. 2006 Fixed Asset turnover= Sales Fixed Asset Fixed Asset turnover = 42.02% 2007 Fixed Asset turnover= Sales Fixed Asset Fixed Asset turnover = 61.62% 2008 Fixed Asset turnover = 65.52% 2009 Fixed Asset turnover =86.23% 2010 Fixed Asset turnover =77.96% ANALYSIS: The fixed turnover ratio measures how effective the firm uses plant and equipment. The role of fixed asset is to support the sales. The fixed Asset turnover ratio of year 2007 is 0.81 times and in year 2006 was 0.97 this shows that as there is a decrease in sales or the fixed assets are increased but cant boost up sales.

2006 Total Asset turnover= Sales Total Asset Total Asset turnover = 2007 Total Asset turnover= Sales Total Asset Total asset turnover = 34.09% 2008 Total Asset turnover =49.53% 2009 Total Asset turnover =68.58% 2010 Total Asset turnover =63.97% ANALYSIS: The final asset management ratio the total asset turn over ratio measures the turnover of all the firm assets and help us to identify when problem occur that is a problem in fixed assets or in current assets.. DEBT MANAGEMENT RATIO Shows the extent to which the firm is financed by debt. 2006 Debt to equity = Total Debt Shareholder equity Debt to equity = 2.34 times 2007 Debt to equity = Total Debt Shareholder equity Debt to equity = 1.75 times 2008 Debt to equity =0.84 2009 Debt to equity = 0.65 2010 Debt to equity =0.53 ANALYSIS: The debt to equity ratio in 2006 was 0.60 times which shows that debt is 0.60 times than equity. However in 2007 the debt to equity ratio decreased to 0.38 which shows that the company curtails its financing through debts although there is a decline in the risk the company facing and the firm is to ideal situation which is 60% equity & 40% debt. 2006 Time interest earned= EBIT Interest

= 2,041,984000 264,297000 Time interest earned= 7.72 times 2007 Time interest earned= EBIT Interest = 995,285000 207,105000 Time interest earned = 4.80 times ANALYSIS: Indicates a firms ability to cover the interest charges. The interest coverage ratio was 7.72 in 2006 which have decreased to 4.80 in 2007 therefore the company are not able to cover the interest expense at a higher margin of safety. PROFITABILITY RATIOS This ratio shows the combined effect of liquidity, asset management and debt management ratios. 2006 Profit margin = Net income Sales Profit margin = 28.08 % 2007 Profit margin = Net income Sales Profit margin = 18.66 % ANALYSIS: Profit margin of year 2007 declined because of the high cost which occurs because of inefficient operations. 2006 Basic Earning Power= EBIT Total Asset = 2,041,984000 6,198,107000 Basic Earning Power= 32.94 % 2007 Basic Earning Power= EBIT Total Asset = 995,285000 6,400,688000 Basic Earning Power = 15.54 % ANALYSIS: This ratio shows the raw earning power of the firm asset before the influence of taxes and leverage and it is useful for comparing firm with difference tax situations and different

degrees of financial leverage. The BEP of year 2006 was 32.94 % which decreased in 2007 to 15.54 %. 2006 Return on Asset= Net income Total Asset = 1,203,735000 6,198,107000 Return on Asset = 19.42 % 2007 Return on Asset= Net income Total Asset = 646,323000 6,400,688000 Return on Asset = 10.09 % ANALYSIS: The return has decreased from 19.42 % to 10.09 that means that the assets are not efficiently used. 2006 Return on equity = Net income Common equity Return on equity = 28.70 % 2007 Return on equity= Net income Common equity Return on equity = 15.41% ANALYSIS: This ratio is the most important ratio for investor point of view. This ratio shows that how much investors get return on their money that they have invested in company stocks. If we compare the ROE of 2006 to 2007 there is a decline on ROE by 13.29% is not a good sign for the investors to invest in company shares and this is also a threat to Fauji cement because it is the goal of every company to maximize its shareholders wealth. MARKET VALIE RATIO

It relates the firms stock price to its earning, cash flow, and book value per share. These ratios give management an identication of what investors think of the companys past performance and future prospect Earning per share 2006

EPS = total shareholder equity attributable to C/s No of outstanding common stock EPS = 7.35 2007 EPS = total shareholder equity attributable to C/s No of outstanding common stock EPS = 9.67 2008 EPS =9.84 2009 EPS = 14.21 2010 EPS =9.70 Analysis Earnings per share ratio (EPS Ratio) are a small variation of return on equity capital ratio and are calculated by dividing the net profit after taxes and preference dividend by the total number of equity shares. As its shows that the earning power of the company has decreased. 2006 DPS = dividends paid number of shares in issue DPS = 1.50 2007 DPS = dividends paid number of shares in issue DPS = nil Analysis Dividend per share (DPS) is a simple and intuitive number. It is the amount of the dividend that shareholders have (or will) receive for each share they own. The company paid dividend in 2006 but in 2007 it didnt paid any dividend. 2006 Price per share / EPS = Price per share EPS Price per share / EPS = 19.38 RS 2007 Price per share / EPS = Price per share EPS Price per share / EPS = 20.09 RS Analysis: (P/E) ratio shows how much investor is willing to pay per Rupee of reported profits. There is an increase in P/E ratio. This shows that there is a little growth prospect of the

company and the company is not much riskier then other companies in the industry and the investors are willing to take risk