Mapping qualitative analysis with financial numbers :

against Balance sheet, income and cash flow statements of ---------- to identify key risks Risks Liquidity risk WATCH OUT CORE VS NON CORE ACTIVITIES SUPPORTING LIQUIDITY Financial factors Profit & Loss Accounts Sales growth Gross margin growth Operating profit growth Net profit growth Balance Sheet Current ratio Quick ratio NWC ratio (i.e.) A/R ratio A/P ratio Inventory ratio Cash flow statement Cash from trading activity Gross cash from operations Net cash after operation Cash after debt amortization Financing risk WHEN NCAO/CADA IS NEGATIVE, BORROWING REQUIRED TO REPAY Profit & Loss Accounts Interest Financial charges Balance Sheet ST debt CPLTD LT debt Equity Directors loan Gearing Leverage EBITDA DSCR Cash flow statement Surplus cash from operations (NCAO/CADA) Ability to service interest, current maturities Refinancing borrowing to repay, if NCAO/CADA is negative Mis match in cash flows

Financial risks are mapped Risk Level

Foreign exchange risk

Profit & Loss Accounts 1.Both the companies have almost 50% of there sales from export and are exposed to dollar flunctuation.DG Khan have foreign trade and protected itself from dollar fluctuation through forward exchange and derivative contracts to hedge its currency risks. Where as lucky cement have

Balance Sheet 1.DG khan have done short term financing for both import and export in order to generate cash. Lucky cement have taken short term loan for hypothecation on stores and spares, stock_in_trade and trade debts. Balance Sheet A/R Vs A/P Currency of debt Vs. operation of business ST Vs LT hedging policy Cash flow statement The Pkr deflation rate is 5% for the period under consideration and as both company have more than 50 % business in export and the currency is dollar they both suffer from translation and transaction losses however DG Khan have hatched there dollar conversion price which redue there impact Interest rate risk Cash flow strength to counter interest rate vulnerability Profit & Loss Accounts 1.Interest paid by DG khan in term of long term loan has been increasing and company short term interest is decreasing suggesting payments have been made in short term loan, DG Khan burden on financial charges decreased due to profit from investment in derivatives. In case of lucky cement the company relied more on short term borrowing for generating cash flow, lucky cement have not invested in derivative market. 2.DG Khan have foreign trade and protected itself from dollar fluctuation through forward exchange and derivative contracts to hedge its currency risks. Balance Sheet 1.DG khan have done short term financing for both import and export in order to generate cash. Lucky cement have taken short term loan for hypothecation on stores and spares, stock_in_trade and trade debts. Cash flow statement 1. DG KHAN CEMENT was able to make payments of the interest by taking short term loans as evident from increase in short term borrowing where as there was no such case in lucky cement 2. DG khan have to beer heavy interest ratio as there loan is considerably high and thus making risk of investment high in company. The interest paid in case of lucky cement is small and the risk for investment Profit & Loss Accounts Commodity exposure Impact on bottom line Ability to pass on pricing to buyers Balance Sheet Inventory management Inventory ratio

Commodity risk Companies relying commodities

on

Impact on A/P & A/R

Cash flow statement Impact Counter party risk Creditworthiness of counter parties Profit & Loss Accounts Evidence of goods returned Bad debt provision/write offs Balance Sheet A/R management Bad debt records Cash/investment in difficult jurisdiction Cash flow statement Weakening cash flows due to poor A/R management Equity risk Risk associated with equity exposure Profit & Loss Accounts Income from investments/associates/subsidiaries Dividend pay out policy Balance Sheet Performance of investment Cash flow statement Ability to pay dividend out of operating cash flows Contingent risk Profit & Loss Accounts Possible provisions Possible losses Balance Sheet Impact if called off Impact on net worth Adjusted gearing Cash flow statement Impact on operating cash flows Ability to absorb I

Key Outcome