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Financial analysis of Crescent bahuman Ltd

Submitted by: Shahid Ashraf Butt

Submitted to: Sir Burhan shah

QASMS Quaid-i-Azam University Islamabad

Chapter#1
Objective of my assignment. Introduction of CBL. Organizational structure. Products and Services. Customers. 1 1 3 4 4

Chapter #2
Financial Analysis Profit and loss account Balance Sheet Horizontal Analysis Income Statement Vertical Analysis Income Statement Vertical Analysis Balance Sheet Asset Side Horizontal Analysis of Balance Sheet Ratio Analysis Liquidity ratio Activity ratio Profitability ratio Leverage ratio Weakness Strength 12 13 15 16 17 17 5 6 8 9 10 11

Chapter # 3
Recommendation Conclusion 18 19

Chapter # 1 Introduction:
Objective of my assignment:
The objective of my study is to know how the financial statements are analyzed in a professional manner. The company that I am select for the financial analysis is Crescent Bahumn Limited

Introduction of CBL:
The Crescent Group (CG) has been in business since the beginning of twentieth century. They are known for their strong business ethics and their highly professional management, for which they command respect from the local and international business community. With its widespread presence, strong background and management strength, Crescent Group is well positioned to continue expanding rapidly by taking advantage of the liberal and improving economic environment in Pakistan. They have survived and recovered from turbulent political situations and economic crisis spread from the partition of the sub continent and Pakistans history. The Crescent Textile Mills Limited is a Pakistan-based company. The Company is engaged in the business of textile manufacturing comprising of spinning, combing, weaving, dyeing, bleaching, printing, stitching, buying, selling and dealing in yarn, cloth and other goods, and fabrics made from raw cotton and synthetic fibers. It also operates a cold storage unit. The Company operates in two segments: textile and cold storage. The textile segment comprises of spinning, combing, weaving, dyeing, bleaching, printing, stitching, buying, selling and dealing in yarn. The Cold storage segment provides storage facilities to the farmers

Crescent Bahuman is the largest vertically integrated denim manufacturing facility in Southeast Asia. Crescent Bahuman Ltd. originally setup as a joint venture between The Crescent Textile Mills, Pakistan and Greenwood Mills Inc., USA is now fully owned by the Crescent Group. The plant is located in Tahsil Pindi Bhattian, District Hafizabad. Core business consists of exporting fabrics and jeans wear to European, Australian, US and Pacific Region. Through the use of high-tech equipment and modern techniques, company is able to cop up the latest trends without compromising on quality. They have their own power plant that gives them ability to control and maintain an uninterrupted power supply Designed as vertical jeans wear facility; it commenced commercial production in June 1995. The plant is situated on 550 acres with 165 committed to commercial activates and manufacturing facilities of 1 million square feet. The facility is one of the first single site operations to include processing of raw cotton through finished jean wear. It also has a wastewater treatment plant and a power generation plant within the compound. During last 20 years, Crescent Bahuman has concentrated on growth through improving product and service quality by using the technology and people utilizing its extensive techniques to increase work developing at large scales and stable the image of the company in the eyes of the international community and managing its non performing loss via improved risk management process. Crescent Bahuman today, represents the largest company in the whole Asia that has grown with time, experience in Pakistan. That organization is now trading the jeans in whole of the world and gaining the name in the international community, on the behalf of its manufacturers.

Crescent Bahuman has an interesting and great impressive environment in jeans and denims production. The level of the job satisfaction increase in working CBL and productivity is also increased. ORGANIZATIONAL STRUCTURE: CBL comprises of nine divisions, 14 Departments and 47 Sections. These departments are Departments of CBL:

Human Resources Finance Information technology Engineering (Mechanical, Electrical, and Power house) Marketing Supply chain Industrial Engineering Product Development Spinning Weaving Cutting Sewing GWP

Products and Services Jeans Shirt Upper of jeans T- Shirts on demand Levis Express

Customers: Levis (World Wide) Stonage Blend Ben Shermen Nautica Jeans Co. Espirit Denim Colorado Mustang GAP Big Star Carrera Mc Gordon Identity Arezona Limited Express

Chapter #2

Financial Analysis

CRESCENT BAHUMAN LIMITED PROFIT AND LOSE ACCOUNT FOR YEAR ENDED JUNE 30, 20

Years Sales - net Cost of goods sold Gross profit Distribution and selling expenses Administration expenses Operating expense other operating income profit from operation Finance cost share loss of associated profit/loss before tax Provision for taxation profit/loss for year

2006

2007

2008

2009 9,175,267 1,575,245 -392,885 -168,350 -376,284 251,433 251,433 -815,948 165,307 -399,208 59,498 -458,706

2010 9,406,644 1,456,742 -470,413 -182,018 -136,872 212,300 212,300 -536,270 120,022 -203,948 118,821 -322,769

4,973,370 5,730,397 8,712,218 10,750,512 10,863,386 4,449,094 5,201,126 7,878,329 524,276 -207,011 -139,531 -9,931 172,137 172,137 -356,960 0 -184,823 40,000 -224,823 529,271 -232,250 -119,556 -93,546 497,587 497,587 -464,397 0 33,190 29,301 3,889 833,889 -242,093 -127,768 -165,260 214,755 214,755 -613,172 88,434 -309,983 19,895 -329,878

CRESCENT BAHUMAN LIMITED Balance Sheet As At June 30,200..


Year Authorized share capital 100 000 000 (June 30, 2009: 100 000 000) ordinary shares of Rupees 10 each Issued, subscribed and paid up share capital Reserves Capital reserves Total Equity Surplus on revaluation of operating fixed assets net of deferred tax Current Liabilities Trade and other payables Accrued mark-up Short term borrowings Current portion of long term financing Provision for taxation liabilities against asset subject to finance lease Non-current liabilities Defer income on sale and lease back of fixed asset long term Financing Term Financing certificate Liabilities against asset subject to finance lease Bills payable Deferred tax liability Total liabilities And owners equity 89,361 683 1,209,833 399,940 13,351 420419 70854 8,813 137 953333 299955 1087403 199970 1,108,019 656,351 13382 224,361 85,002 2,322,238 325,169 321688 114319 3070846 356485 377205 119112 4585543 398861 315,065 177,207 4,883,207 356,845 73,361 521,393 106,719 4,840,018 451,668 90,890 1,000,000 406,693 1,628,860 426,266 2,461,819 1,000,000 447,362 1676007 865,863 2,989,232 1,640,409 1,000,000 492,099 1600168 351,010 2,443,277 1,640,401 2,261,837 1,640,393 2,672,439 1,640,407 1,000,000 492,099 1,769,738 1,000,000 492,099 2,180,340 2006 2007 2008 2009 2010

7,131,757 10,251,059 10,851,772 10,815,934 10,988,698

Current assets Stores and spares Stock in trade Trade debts Loans and advances Short term deposits and prepayments Balance with statury authorities Interest accrued Other receivables Short term investments Sales tax recoverable Cash and bank balances Non-Current Asset Property, plant and equipment Investment in an associate Long term investments Long term loans and advances Long term deposits and prepayments Deferred tax - asset Total Asset 1,153,175 1,364,480 5,459 1120161 1491611 3235 2,152,277 4,447,419 4,226,157 352,564 570,758 1,632,403 3,558 6,302 4,182,387 485,335 227,883 1,812,096 2,217 20,344 3,981,181 617,870 255,197 1,928,720 2,827 84,716 40,570 2,731 20,934 192,039 962,695 1,002,954 71,678 78,049 203,450 978,266 1,258,121 76,950 5,346 54,186 7,605 71,564 498,644 27,136 7,365 215,230 1,240,654 2,106,306 71,653 1,555 61,565 10,156 57,862 231,012 55,465 8,572 18,931 16,419 22,081 61,909 65,253 109,446 49,706 174,116 940,421 2,562,348 239,191 1,422 169,769 1,047,150 2,579,901 224,556 5,956

7,131,757 10,251,059 10,851,772 10,815,934 10,988,698

Horizontal Analysis Income Statement

Years Sales - net Cost of goods sold Gross profit

2006 100% 100% 100%

2007 115.22 116.90 100.95

2008 175.177 177.077 159.055

2009 216.16 206.22 300.46

2010 218.43 211.42 277.85

Distribution and selling expenses Administration expenses Operating expense

100% 100% 100%

112.192 85.68 941.95

116.94 91.56

189.78 120.65

227.24 130.44 1378.22

1664.08 3788.98

other operating income Finance cost share loss of associated

100% 100%

289.06 130.09

43.15 171.77

117.07 228.58

84.436 150.23

profit/loss before tax Provision for taxation profit/loss for year 100% 100% 100% -688.06 73.25 -153.99

65.89 1401.39 2723.214 49.73 54.55 148.74 -313.96 297.05 -604.47

Vertical Analysis Income Statement

Years Sales - net Cost of goods sold Gross profit

2006 100% 89.46 10.54

2007 100% 90.76 9.24

2008 100% 90.43 9.57

2009 100% 85.35 14.65

2010 100% 86.59 13.41

Distribution and selling expenses Administration expenses Operating expense

-4.16 -3.14 -1.89

-4.05 -2.30 -17.67

-2.78 -1.62 -19.82

-3.65 -1.83 -23.89

-4.33 -1.93 -9.40

other operating income profit from operation Finance cost share loss of associated profit/loss before tax Provision for taxation profit/loss for year

3.46 7.64 -68.09

8.68 11.18 -87.74

2.46 6.52 -73.53 1.02

2.34 9.69 -51.80 1.54 2.22 0.65 11.36

1.95 9.35 -36.81 1.10 4.27 1.26 23.66

-0.34 0.90 -10.88

2.04 0.56 16.59

-0.13 0.25 -3.73

Vertical Analysis Balance Sheet Asset Side

Years Stores and spares Stock in trade Trade debts Loans and advances Short term deposits and prepayments Interest accrued Other receivables Short term investments Sales tax recoverable Cash and bank balances Non-Current Asset Investment in an associate Long term investments Long term loans and advances Deferred tax - asset Total Asset

2006 2.69 13.50 14.06 1.01 1.09 0.04 0.29 0 1.19 0.57

2007 1.98 9.54 12.27 0.75 0.05 0.07 0.70 4.86 0.26 0.07

2,008 1.98 11.43 19.41 0.66 0.01 0.09 0.53 2.13 0.51 0.08

2,009 1.61 8.69 23.69 2.21 0.01 0.20 0.57 0.60 0.00 0.18

2010 1.54 9.53 23.48 2.04 0.05 0.00 1.00 0.45 0.00 0.15

4.94 16.17 19.13 0 100% 10.93 14.55 0 100% 5.26 15.04 0.06 100%

4.73 2.11 16.75 0.19 100%

5.69 2.32 17.55 0 100%

Horizontal Analysis of Balance Sheet

Years Stores and spares Stock in trade Trade debts Loans and advances Short term deposits and prepayments Interest accrued Other receivables Sales tax recoverable Cash and bank balances Non-Current Asset Property, plant and equipment Long term investments Long term loans and advances Long term deposits and prepayments Total asset

2006 100% 100% 100% 100% 100% 100% 100% 100% 100%

2007 105.94 101.62 125.44 107.36 6.85 278.47 341.86 32.03 18.15

2,008 105.79 126.82 167.42 93.12 29.09 133.54 80.85 204.40 116.39

2,009 80.90 75.80 121.65 333.82 91.45 217.42 106.99 0.00 220.85

2010 97.50 111.35 100.69 93.88 418.85 0.00 176.79 0.00 86.73

100% 100% 100% 100% 100%

206.64 97.14 109.32 59.26 143.74

95.02 50.95 109.44 109.98 105.86

98.96 39.93 111.01 62.31 99.67

95.19 111.99 106.44 127.51 101.60

Ratio Analysis:
Liquidity ratio Activity ratio

Profitability ratio Leverage ratio Liquidity ratio: A firms ability to satisfy its short term obligations as they come due. Years Current Ratio Quick Ratio Net working capital Cash Ratio 2006 0.83 0.44 -500404. 2007 0.82 0.52 -688087 2008 0.74 0.48 -1420691 2009 0.70 0.51 -1720013 2010 0.70 0.50 -1807785

0.0137211 0.0018998 0.00156403

0.00326077 0.00273163

Interpretation: The current ratio of the company has overall decreasing trend the reasons for downwards trends are that the company decrease in loans and advances ,decrease in cash and bank balances, increase short term borrowing , increase in trade and other payables, decrease in short term deposits and prepayments. The quick ratio has mix trend the reason for increase in 2007 is that the company trade debts and short term investment was increased. The reasons for decrease in 2008 are that the company increase short term borrowing in this year. The company has negative working capital which represent that the fixes asset of the company is financed by current liabilities. The cash ratio of the company is very small that represent that companys short term debt ability is very low. The analysis shows that the firms ability to pay off its short term debts has declined and it is not having a positive impact on the company.

Activity Ratio:

ACTIVITY The effectiveness of management towards the utilization of resources to generate sales. FORMULAS: Turnover Analysis: Total Assets Turnover=Sales/Total Assets Fixed Assets Turnover=Sales/Fixed Assets Inventory Turnover=Cost of Goods Sold/Inventory Receivables Turnover=Sales/Receivables Period Analysis: Collection Period=No. of days in a year/Receivable Turnover Payment Period-=No. of days in a year/Payable Turnover

Years Inventory Turnover inventory turnover in Days Account receivable turnover Account receivable turnover in days

2006

2007

2008

2009

2010

3.852917 4.4013333 5.4113714 8.2323575 7.7298851 94.73342 82.929416 67.450555 44.337239 47.219331 4.958722 4.5547265 4.1362547 4.1955706 4.2107763

73.60768 80.136536 88.244083

86.99651 86.682353

Total assets turnover Fixed assets turnover

0.697356 0.5590054 0.8028383 0.9939513 0.9885963 2.310748 1.288477 2.0614989 2.570425 2.7286843

Inventory turnover has increasing trend the reason for increase in inventory turnover are that the company C.G.S is increased every year due to increase in raw material and oil & gas prices .The inventory turnover in days decrease every year that is positive sign for the company. Account receivable turnover shows the liquidity of receivables, it shows decreasing trend which is negative sign for the company.The account receivable turnover in days has an increasing trend which shows that company this is also a negative sign for the company. The company cash has been struck in trade debt for long period .This will also increase the bad debt for the company.The collection system of the company shows poor performance of the management of the company. Total asset turnover measures the activity of the asset and the ability of the firm to generate sale through the use of the asset. There is increase in asset turnover in 2008the reason for the increase is the year 2008-09 was a challenging year as the economy confronted many headwinds which hindered GDP growth to 1.60% as against 4.10% in previous year. In 2009 the company recorded robust growth in sales; which crossed to Rs.10 billion marks (including Rs.3.37 billion sales from trading activity). The improvement in sales was achieved on increase in sales of value added products and also due to PKR depreciation. Further, despite increase in cost of sales by 16.49% the company managed to show an enhanced gross margin (14.65% of sales) as compared to the previous year (10.95% of sales). This was achieved by focusing more on products with better margins, better lead times and PKR depreciation.

Profitability Ratio:

The ability of business to generate return for the owner. OR The overall effectiveness of management is called profitability. Years Gross profit margin Net profit margin Return on Investment Return on paid up capital Operating profit margin Per tax margin earning/loss per share 2006 10.54 -1.15 -0.80 -14.02 6.84 -0.34 -1.4 2007 9.24 1.53 0.86 19.63 10.15 2.04 1.78 2008 9.57 -0.36 -0.29 -6.32 5.89 -0.13 -0.63 2009 14.65 1.67 1.66 36.38 8.27 2.22 3.64 2010 13.41 3.17 3.14 70.04 8.10 4.27 7

The gross profit margin increases in 2009 because growth in sale cross 10 billon, the improvement in sales was achieved on increase in sales of value added products and also due to PKR depreciation. Further, despite increase in cost of sales by 16.49% the company managed to show an enhanced gross margin (14.65% of sales) as compared to the previous year (10.95% of sales). This was achieved by focusing more on products with better margins, better lead times and PKR depreciation. In 2010, decrease in gross profit is due to increase in cotton price and higher international demand. In 2006, the net profit margin is in negative because the finance cost is very high. In 2007, the net profit margin recovers because the other operating income is high. In 2008, the net profit margin negative because the operating expense, the distribution expense, administration expense and operating expense is increase and the finance cost increase in this year. In 2009, net profit margin increase because the increase in sale and share profit of associate. In 2010, net profit margin increase because there is decrease in finance cost and share profit of associate. Overall sales of the company were

slightly higher (1.05%) compared to previous year's sales as domestic sales surged by 19.70%. Major thrust in such sales was coming from yarn which rose by 32.34%.Net profit after tax was 3.17% of sales against 1.67% during last year; which improved earnings per share to Rs 7.00 from Rs 3.64. Other operating expenses and financial costs declined by 63.63% and 34.28% respectively from last year. Operations remained smooth and stable despite serious energy crises and difficult security situation in the country. Yarn prices remained bullish on sharp increase in cotton prices and higher international demand but value added sector faced brunt of high input costs.

Leverage ratio:
Years Debt to Equity Debt to total asset 2006 0.40 0.14 2007 0.36 0.14 2008 0.35 0.13 2009 0.33 0.12 2010 0.20 0.08

The debt to equity ratio is another computation that determines the entitys long-term debt-paying ability. It helps determine how well creditors are protected in case of solvency. The long-term debt-paying ability, the lower the ratio, the better the companys debt position has decreasing trend the reason is that the company has pay liability as it comes due. This will show positive point for the company. The debt to total asset ratio indicates the percentage of asset financed by creditors and it helps to determine how well creditors are protected in case of solvency. It shows positive point for the company.

Weakness:
Account receivable turnover shows the liquidity of receivables, it shows decreasing trend which is negative sign for the company. The account receivable turnover in days has an increasing trend which shows that company this is also a negative sign

for the company. The company cash has been struck in trade debt for long period. This will also increase the bad debt for the company.The collection system of the company shows poor performance of the management of the company. The company has negative working capital which represent that the fixes asset of the company is financed by current liabilities. The cash ratio of the company is very small that represent that companys short term debt ability is very low. The cash ratio of the company is very small that represent that companys short term debt ability is very low.

Strengths:
The organization is completely independent manufacturing firm; it takes cotton as input and gives output in the form of garments, fabric, and yarn. Quality is the main factor for the success of any organization. Thats why CBL is ISO 9001 certified company for his quality products.CBL is having its own power generation plant. So cant be affected by energy crisis faced by the industry now days. CBL enjoys first movers in that industry. So is much developed and well reputed in the industry internationally. LEVI STRAUSS is the most renounced brand of jeans, and CBL is the biggest manufacturer of LEVI STRAUSS in Pakistan yet. The industry is quiet expensive to enter for any new comer, especially in the current scenario of economic and energy crisis.

Chapter#3
Conclusion & Recommendation
Recommendation:

It is finally concluded that CBL management is working in a more focused and formalized manner. However, to achieve their objectives successfully on the International standards, the following suggestions are offered: The CBL should also take interest in the local marketing to increase the profit. The company must decrease the finance cost, so That it increase its net income. The company must decrease the short term borrowing from the bank because it charges high interest. The company must make the process of collecting receivable quick so that it has enough cash to pay its short term liability as it come due. As the turnover rate is very high, the management should look for the reasons and take effective steps to overcome the causes and not only the symptoms. The company must make his account receivable collection policies good enough so that it collects it trade debts.

CONCLUSION
The Crescent Textile Mills is on the way of progress. It has been earning profit for the last five years. The management is professionally qualified and experienced.

The Crescent Textile Mills should motivate their employees by providing different incentives. Their salary package is also not attractive. Crescent Textile Mills product is of high quality. The demand of Crescent Textile Mills products is increasing with the passage of time. The company is expanding its capacity to satisfy the demands of their customers. Management of the company is trying to improve more and more to earn profit and improve the economy of the Pakistan. In last I conclude from the financial analysis of the company, which the company has to face difficult time due to economic condition of our country but in recent two year the company began to earn high profit from export.