sapphire fibres limited

8/9/2019 Sapphire Fibres Limited

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SAPPHIRE FIBRES LIMITED

HORIZONTAL

ANALYSIS

PROFIT & LOSS

ACCOUNT


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PROFIT & LOSS ACCOUNT

HEAD

YEAR

Increase in Sales

Increase in CGS

Increase in Gross

profit

Increase in Selling &

Admn exp

Increase in Operating

income

Increase in Operating

profit

Increase in Finance

cost

Increase in Profit

before Tax

Increase in Profit after Tax

2007 2006 200517.18 14.68 (24.57)

16.94 48.78 (28.26)

23.47 37.61 11.48

14.99 45.68 (12.3)

94.0 80.96 24.89

32.36 41.7 16.62

13.72 133.17

33.2

73.16 13.16 11.82

78.99 14.71 14.47

25.82 14.42 12.57


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Earning per share

ALL THE VALUES REPORTED IN THE FIGURE ARE IN PERCENTAGE EXCEPT

EARNING PER SHARE

Sales

We can see from the table that sales of the company

have decreased up to a very much significant amount in

financial year 2005 as compared to the financial year 2004.

It has a down fall of 24.57% which is not good. The major

reason of this downfall is no export of YARN in 2005.

Previous Year Company made a significant amount of export

of YARN which constitutes a major portion of the sales. In FY

2006 Company improved its sales and an increase of 47.25%

was observed. In 2006 major reason for the increase was

increase in almost 100% sales of GARMENTS as compared to

previous year in local as well as in international market. FYyear 2007 has shown an increase of 17.18% in sales. This

time almost every product which company manufactures has

improved by its sales YARN, FABRIC, and GARMENT etc.

Looking at overall position of these sales records

I can say that company position in FY 2005 wasnt very good

but in FY 2006 and FY 2007 it has improved a lot. I can say

that now it is in a good position because company has

recovered its down fall which occurred in FY2005 and is

progressing.

Cost of good sold


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Looking at the C.G.S of FY 2005 it has

gone down to 28.26% simply because this year company

sales was reduced by 24%.we can say that company is

earning a net profit of almost 4% but it isnt good as far as

company tempo of sales has reduced a lot and this 4%doesnt hold any value over here. Looking at the increase in

C.G.s of the FY 2006 it is very sales have increased by

47.50% and C.G.S has increased by 48.78%. Major reasons

for this increase are prices of raw material purchases were

increased and maintained as reasonable stock along with

increase in fuel and power factor prices, an increase of 47%

was observed in fuel and power prices. The amount of

insurance paid and depreciation charged was increased by105.57% which is very much significant. There was also little

increase found in head of STAFF RETIREEMENT BENEFIT

which is a good factor and will have good impact on the

performance of the employees. We can say that company

has improved its sales by increasing in the prices of the

items that company manufactures.

FY 2007 has shown an

increase of 17.18% in sales and increase in C.G.S was found

16.94%. This is good sign as comparing it with the

performance of company in FY 2006 where there was an

abrupt increase was found in cost of goods sold as well as in

sales. But looking at the overall performance in this criteria

company needs to improve a lot, because it is not maintain

reasonable differences between the sales and cost of goods

sold in order to improve its profit margins.

GROSS PROFIT

Gross profit is simply the difference of

excess of sales on cost of goods sold mean that it is a

dependant quantity. Company earned a gross profit of


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11.48% in FY 2005 despite having a significant down fall in

its sales. But it is not a good factor because company has

lost major portion of its sales in that financial year.

In 2006 gross profitincreased by 37.61. It is a very good sign because company

was facing an increase of almost 48% in cost of good sold

but it managed to get a handsome amount of gross profit.

But how much it was good it will become clear from the

upcoming expenses that we will found in later part of the

analysis. Gross profit ratio faced a down fall and remains

23.47% in year 2007. But still it is a good one.

SELLING & DISTRIBUTION COST

Selling and distribution

cost faced a down fall in year 2005 because that year

company sales were reduced especially export of yarn.Because of this a large amount of payment was not made

which company makes every year in freight & dock charges

related to export material. This down fall isnt good one.

Overall looking one can say that there is a down fall in this

head so it is a good impact but frankly speaking it is not a

good impact. Because this down fall has occurred after

loosing a large portion of its sales & no one believes that

reduction in sales is a good sign. Year 2006 faced an

increase of 34.60 in this head. Main reasons were more

contribution in staff retirement benefits account along with

increase in salaries of the employees by the company this

year. Almost this year it has been raised by 35% as

compared to previous year.


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This will have a good impact on the employees

productivity. Year 2007 has faced an increase of 38.23%.

Mainly it is because of increase in travelling & conveying

expenses because company sales have increased so its

delivery will also increase its circulation expenses. A verybad impact is the of doubtful debts ranging up to 5,000,000

Rs(5 millions) and last year there was not even a single

rupee doubtful debt. If we remove this portion of doubtful

debts from selling and distribution head then there would an

increase of only 3% in selling and distribution cost of

company this year. So this is having a very bad impact on

the companys position and surely it is not a good sign.

ADMINSTRATIVE EXPENSES

Administrative expenses

faced a down fall of 7.5% in FY 05 but we cant say that it is

a good sign because it has occurred after a decline of almost

25% in sales. In FY 06 an increase of 48.34%was observed in

this head. This increase is mainly because of two factors1)55% increase observed in the head of directors

remuneration 2) 44% increase in salaries of the

administrative staff along with the retirement fund that

company offers to its employees. 2nd factor will have a

greater impact on the performance of the employees as they

will be getting more benefits.

Last year an increase of 9.94 % was observed.

Major reasons this year were also like the previous year i.e.increases in the salaries, directors remuneration, and

depreciation and insurance premium. Overall looking

company is going in a better condition because its

administrative cost is matching with the inflation rate that

we normally have in Pakistan.


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OPERATING EXPENSES

The other operating expenses ofthe company in FY 05 has increased by almost 21% but it is

not a good sign because the company has lost a lot part of

its sales so its expenses should also decrease but it hasnt

happened over here. But in FY 06 this expense has increased

by only 4.29%. Its a good sign because the company sales

have been increasing but this expense has not increased

with the same proportion.

In FY 07 it has increased by 44.45% .it is not agood sign. Basic increase was found in the head of the

workers participation and workers welfare fund. Last year

not even a single rupee was given to the workers welfare

fund.

OPERATING PROFIT

Operating profit increase by 17.68%

in FY 05 despite having a downfall in its sales. It is good that

company is still going in a profitable condition. In FY 06 it

has increased by 41.7%. Company is still marinating a profit

range. Operating profit increased by 32.36 percent in FY 07.

So looking it over all company maintains a trend of profit.

FINANCE COST

Finance cost in FY 05 increased by 32.36%.

Main reason for the increase in the finance cost were

increased in the markups of long term loans along with the


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short term borrowings. Mean that company is getting more

and more loans for the increase its assets to increase its

production to meet the market demand. FY 06 faced an

increase of 133.17% relative to the previous financial year.

An abrupt increase was found in every sub head of financecost. Looking at the head of the liabilities its liabilities are

not increased in that proportion as the finance cost has

increased. Broadly looking it is not a good sign because we

can say that company isnt is a position to hold enough cash

to meet its demands. FY 07 faced an increase of 13.72%.

Looking at the figure it looks very much good that finance

cost hasnt increased much. Going into depth a minute

change was found in every head. So company is marinatinga good control on its finance cost.

PROFIT AFTER TAXATION

Profit after tax of the company

is raised by 14.71% in FY 05.thing is to be noted that in that

financial year company had lost a large portion of its sales.But company manages to earn a good range of profit after

losing its sales. Going ahead in financial year 06 company

again raised profit with increasing proportion of 15.09%.

Again this is a good impact that company is keep on

increasing its efficiency and making profit. And in financial

year 07 its profit was increased by 78.99%. This is a great

achievement for the company that it is maintaining a profit

trend every year. So company is going in a flourishing mood.

EARNING PER SHARE


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FY04 got an earning per share of

10.98 and it was raised to 12.64 in year 05. It is good that

earning per share of the company is raised despite having a

down fall in its sales that year. Investors along with the

creditors have a confidence on the company managementad they will be happy to give them credit on easy conditions.

Again in year 06 it was raised to the price of 14.42 mean still

maintaining an increasing pattern in its earning for the

share holders. In FY 07 earning per share was raised to the

25.82 Rs. This is a good sign for the company that it has

increased EPS almost 80%. It will raise companys image in

the eyes of the investors and creditors. So it is a good sign

for the company that it is keep on increasing its EPS andgaining confidence among investors and creditors.


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BALANCE SHEET

ASSETS

Non Current Assets


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PROPERTY, PLANT & EQUIPMENT

INTANGIBLE ASSETS

LONG TERM IVESTMENT

LONG TERM LOANS

LONG TERM SECURITY DEPOSITS

Current Assets

STORES SPARES & LOSE TOOLS

STOCK IN TRADE

TRADE DEBTS

LOANS AND ADVANECES

DEPOSITS AND OTHER RECIEVEBLES

SHORT TERM INVESTMENTS

TAX REFUND DUE FROM GOVT

CASH & BANK BALANCE

LIABILITES

ISSUED, PAID UP, SUBSCRIBED

CAPITAL

2007

2006

2005

3.99 11.12 20.9

28.31 100 0

86.82 111.48

57.14

(26.59)

(18.46)

9.53

(3.70) 5.41 (3.18)

(1.49) 3.45 1.49

2.49 (6.74) 71.53

31.73 22.47 (1.01

)(20.65)

96.60 71.35

21.57 (43.58)

(10.79)

48.34 133.57 309.43

(52.69)

(48.63)

61.23

(21.23)

(15.33)

(30.26)

0 0 0

79.87

119.03 35.25

21.77

14.91 14.97


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RESERVES

UNAPPROPRIATED PROFIT

NON CURRENT LIABILITIES

LONG TERM LOANS

STAFF RETIREMENT BENEFITS

GRATITUTY

DEFFERED TAXATION

CURRENT LIABILITIES

TRADE & OTHER PAYABLES

MARK UP ACCRUED

SHOR TERM BORROWINGS

DUE TO DIRECTOR

CURRENT MATURITY OF LONG TERM

LIABILITIES

PROVISION FRO INCOME TAX

ALL THE VALUES ARE EXPRESSED IN PERCENTAGE (%) FORM

FIXED ASSETS

14.32 6.80 25.63

18.53 (22.36)

12.73

34.91 35.87 65.64

27.83 21.70 (21.05)

(0.6) 34.91 343.74

13.41 2.37 55.25

0 0 0

(16.13)

15.15 380.97

5.17 (43.68)

1.14


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The property, plant and other equipments

of the company has increased in FY 05 by 20.9%. It is a good

sign for the company that its fixed assets are increasing

.More over we must realize that in this year Company has los

its sales by 25%. So Company that next year that its saleswill increase and it made necessary steps to meet the

upcoming challenges in the market. And it proved good fro

the company in next year and its sales were increased with a

great margin mean in FY 06. Again that year company

increased its property plant equipment by 11.12% and next

year i.e. FY 07 by 4% almost. So company is having a good

financial position and keeps on increasing its fixed assets

related to production to meet the challenges of theupcoming days.

In FY Company developed its own

software (INTANGIBLE ASSET) to meet the daily working and

its happened for the first time in its history so it is a good

sign that it is progressing with the day to day challenges of

upcoming days. Next year again more custom made soft

wares were developed by the company. It is a good sign for

the custom.

Talking about the long term investments that

company has made them has increased by every passing

financial year. It means that custom is in a good financial

position and has good cash balance so that after meeting its

own requirements of cash it is investing out of the company.

Talking about the loans that company has advanced to

others has increased in FY 06 by 18.46% & in FY 07 by26.57%. People can think that it is a bad sign but I feel that it

is a good sign because company is getting and recovering

cash because cash is always good. So it is a good factor for

the creditors of the company that they will gain confidence

on companys financial position. Same is the case with the


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security deposits of the company i.e. they have decreased in

FY 05, 06 & 07 by 3.18, 5.4, and 3.70 respectively.

CURRENT ASSETS

Stores, spares and lose tools

increase minutely in year 05 by 1.49% and then in FY 06

decreased by 3.45% & in FY 07 by 1.49%. Company doesnt

need to have much more lose tools which are related to the

production and reducing the inventory level of all these

items. It will reduce the holding cost and save expense of

the company. Talking about the stock in trade it increased

by 71% almost in year 05 and then decrease by 6.74% then

increases by 2.49%. It is a not a good sign not a bad sign it

depends upon only on the sales volume of the company. If

sales are increasing then it is a good sign no matter how

much stock in trade has increased or decreased.

Trade debts of the company have

increased by 22.47%, 31.73 in FY 06 & 07 respectively. It

decreased by only 1% almost in year 05. Increasing trade

debts are not good sign no doubt. But it is obvious that whenyour sales will increase then your chance of trade debts will

also increase. But it would be better that company has

stopped its trade debt at a low level not much high as it has

happened in year 06 % 07. Loans and other advances of the

company of are as FY 05 71.35% increase, FY 06 96.60%


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increase, FY 07 20.65% decrease. It is a good sign that

shows that company was in a good liquidity position and

made a large amount of loans and advances. It is a good

sign for the creditors as well as the investors of the company

that it has got a good liquidity position. Again in year 06 itincrease by 96.60% was observed in this head of the

account, again a good sign for the credibility of the company

in front of creditors as well as investors. More we can say the

foreign companies that are working with the company as the

customer will also get confidence in company. Because they

can easily see the financial position of the company that it is

increasing its sales and more and more reserves are

creating. There will be not a chance of the company forgoing into liquidation.

Deposits and other receivables of the company

have decreased by 10.79 & 43.58 % respectively in FY 05 &

06. We can say that it is a bad sign for the company but I

feel that it is a good sign why? Because company is getting

cash is this way from its creditors and the chance of

conversion of these creditors into trade debts is minimized in

this way. As cash is always good so its a good sign for the

company. But in FY 07 it was raised by 21.57% a good sign

that it will gain cash for company in coming days. Short term

investments of the company have a great trend of

increasing. In FY 05 when company wasnt doing well these

were increased by 309.43% mean showing a very good

position to the company. Next year they were increased by

133.57 % and in year 07 increased by 48.43%. But point is

to note here that if company is having a lot of reserves withit then why company is getting short term loans from banks

and other financial institutions? It should think about it

positively and use its own money for meeting its day to day

demands and it will reduce its finance cost. Tax refund that

has been due on govt was increased by 61.23% in year 05


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and it was paid by the Govt in year 06 & 07 and it faced a

down fall by 48.6 and 52.69 % respectively. That decrease is

a very good sign that company has recovered its money

which was due on govt. Its really good one because anything

related to cash and balances that u has to get from the govtis really very much difficult. But its the management of the

company that has done it with great efficiency and in future

this cash will help the company to meet its liquidity

demands.

Cash & bank balance of the

company has decreased by every passing financial year.

There were a lot of cash reserves for the company that we

have seen during the analysis but they havent increased

over here. All the cash reserves that we have seen were

converted into short term and long term investments. But

its an alarming situation for the company and it should

maintain a good level of its cash & bank balance.

LIABILITIES

The issued, paid up and the subscribed capital of the

company has not changed in all these financial year whose

analysis is going on. I can say that company is meeting its

demand with its existing resources and not in need of extra

capital its a good situation. Heading towards the reserves of the

company they have been piling up by every passing year. But not

a very good sign I can say this is the liability and must be paid asearly as possible. A good thing is that the company is increasing

its reserve in the head of unrealized gain on remeasurement in

which the amount is specified for the sale investment i.e. this will

be invested for the promotion of the sales of the company. But

this reserve is increasing and hasnt seen in action still.


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The un appropriated profit has

increased by every passing year. The increases were 14.97%,

14.91% &21.77% in years 05, 06, & in 07 respectively. Company

is retaining money which is related to the shareholders only so

they must pay to them in order to win there confidence.

LONG TERM LIABILITIES

Long term loans of the company

were increased by 25.63% in year 05. At that time company

position in terms of its sales wasnt very good. Again in year

06 the long term loans of the company increased by 6.80%.

This time the increase in this head as compared to the

increase in fixed assets in is comfortable one. Next year itincreased by 14.32% i.e. in years 07. It is a relatively a

stable condition of the company that it is increasing its sales

and for this purpose. But we have seen that the investments

of the company in short run and long run were increased

tremendously showing that it has a good stock of liquidity in

its hand then why company is getting loans from out of its

sources. Its a question mark on its management.

Staff retirement benefits were increased by 12.73% in year

05 and faced a down fall in year 06 by 22.36% and then

again increase by 18.53%. All these increase in these staff

retirement benefit funds are good for the efficiency of the

company employees. This will surely have a good impact on

the courtesy of the employees towards company. Talking

about deferred taxation they have increased by every

passing year. 65.64, 35.87, 34.91 were the increases in the

head in year 05, 06, 07 respectively. This is an alarming

situation for the company that their deferred taxes are

pilling up. But on the other hand they are retaining cash as

to meet the demands of the company. But the company

must think about it positively in time otherwise it will create

problem fro it in coming days.


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CURRENT LIABILITIES

Trade and other payables of the

company were decreased by 21.05% in FY 05 but raised by

21.70% and again in year 07 by 27.83%. Relatively it is a

stable condition of the company not so much trade& other

payables are piling up & company is maintaining a good eye

on these liabilities. Mark up accrued has been piling up in

year 05 & 06 by 343.74% &34.91% respectively but

company paid it all in a huge amount and was reduced by .

6% in year 07. So now there isnt a great burden of the

markup on the companys liabilities which had been a great

burden in year 05. Moving towards short term borrowings of

the company they are relatively in a stable condition. In year

05 they were increased by 55.25% and in year 06 by 2.37%

only. Mean that company has a lot of its reserves of its own

so that there was no need of getting loans from the

outsiders. This will have surely reduced the finance cost of

the company and will create reserves. The company is also

debtor of director but not a heavy amount so this headdoesnt make any difference but this must be treated in any

other head rather than making a part of main front balance

sheet. The liabilities that has become payable now are

reduced by 16.13% only but they were piled up in financial

year 06 by 15.15% and in 05 by 380.97 %. It was very much

alarming situation for the company but now there is nothing

to worry and this portion is in the grip of company.

The last

head in these current liabilities is the provision for income

tax. It has nothing much impact on balance sheet but it

represents a good accounting policy of a company.


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VERTICAL ANALYSIS

SALES

HEAD2007 2006 2005

Local sales 27.61 32.94 27.74Exports 72.39 67.06 72.26

TOTAL100 100 100


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COST OF GOOD MANUFACTURED

HEAD2007 2006 2005

Work in process 1.23 1.16 2.60Raw material consumed 69.16 68.40 65.12Factory over heads 29.61 30.44 32.28

TOTAL100 100 100

SELLING & DISTRIBUTION COST

HEAD

2007 2006 2005

Salaries and other benefits 35.89 55.83 55.22Sample expenses 7.37 10.15 17.53Provision for doubtful debts 25.38 - -Travelling & conveyance and entertainment 15.70 13.07 13.36Postage 6.28 7.33 2.89Others 9.38 13.62 17.53

TOTAL 100 100 100

ADMINISTRATIVE EXPENCES

HEAD2007 2006 2005

Directors remuneration 5.22 3.75 3.57

Salaries and other benefits 43.99 45.0 46.21Travelling & conveyance 5.73 3.86 6.07Printing & stationary 2.63 2.48 2.89Electricity gas and water 1.87 3.18 1.94Repair & maintenance 2.97 2.78 2.74Depreciation 7.62 7.43 7.62Legal and professional charges 3.01 6.77 3.73


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Others 26.69 24.75 25.23

TOTAL100 100 100

OTHER OPERATING EXPENCES

HEAD2007 2006 2005

Workers profit participation fund 93.8 90.4 91.60Others 6.2 9.3 8.40

TOTAL100 100 100

OTHER OPERATING INCOME

HEAD2007 2006 2005

Dividend income 75.25 76.21 72.69Scrap sales 8.73 15.37 20.59Gain on disposal of fixed assets 1.28 6.73 6.52Others 14.74 1.69 0.20

TOTAL 100 100 100

FINANCE COST

HEAD2007 2006 2005

Mark up on long term loans 21.89 22.5 15.17Mark up on short term loans 61.84 65.48 68.07

Interest on workers profit participation fund .58 0.34 0.49Bank and other financial charges 15.69 11.68 15.74

TOTAL100 100 100


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ASSETS

PROPERTY, PLANT & EQUIPMENT

HEAD2007 2006 2005

Tangible fixed assets 98.37 97.3 93.93Capital work in progress 1.27 2.7 6.07

TOTAL100 100 100

Capital work in progress

HEAD2007 2006 2005

Buildings 11.30 51.32 23.32Computer hardware - 0 .62Computer software 4.69 4.47 -Plant and machinery 8.32 15.0 58.74

Advance payments 75.69 29.21 17.32

TOTAL100 100 100

LONG TERM INVESTMENTS

HEAD2007 2006 2005

Reliance cotton spinning mills limited 12.08 1.98 4.02Diamond fabric limited 8.26 12.17 22.0

Amer cotton mills Pvt limited 2.72 4.32 7.72Sapphire power generations limited 1.85 3.2 0.73Sapphire finishing mills limited 5.29 30.26 53.65Sapphire electric company limited 25.49 - -Others 44.31 48.07 11.88

100 100 100


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TOTAL

LONG TERM LOANS

HEAD2007 2006 2005

Loans to executive 54.59 60.62 53.85Loans to employees 45.41 39.38 46.15

TOTAL100 100 100

STORES, SPARES & LOOSE TOOLS

HEAD2007 2006 2005

Stores 30.35 29.92 35.90Spares 64.80 61.79 55.42Loose tools 0.17 015 0.13Items in transit 4.68 8.14 8.55

TOTAL100 100 100

STOCK IN TRADE

HEAD2007 2006 2005

Raw material 83.32 82.77 87.75Work in process 4.80 4.55 3.46Finished goods 11.94 12.68 3.76

TOTAL100 100 100


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CASH & BANK BALANC

HEAD2007 2006 2005

Cash in hand 14.78 9.78 1.69Cash at bank 85.52 90.92 98.31

TOTAL100 100 100

LIABILITIES

RESERVES

HEAD2007 2006 2005

Capital reserves 3.05 8.83 12.04General reserves 11.54 20.76 45.47Unrealized gain on remeasurement 85.41 70.41 42.49

TOTAL100 100 100

LONG TERM LOANS

HEAD2007 2006 2005

Standard charted bank 37.0 12.45 22.08MCB bank limited 23.20 39.79 56.68

NBP- - 21.24

Bank Alfalah limited 31.32 47.76 -Habib bank limited 41.87 - -

TOTAL100 100 100


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TRADE & OTHER PAYABLES

HEAD2007 2006 2005

Trade creditors 25.13 18.35 34.89

Bills payable 17.66 21.27 10.05Accrued expenses 35.21 35.43 32.69Sind govt infrastructure fee 9.71 10.06 9.76Others 12.29 14.79 12.61

TOTAL100 100 100

MARK UP ACCRUED

HEAD2007 2006 2005

On secured long term loans 28.35 33.23 28.30On short term borrowings 71.65 66.77 71.70

TOTAL100 100 100

SHORT TERM BORROWNIGS

HEAD2007 2006 2005

Running banks 99.34 99.44 99.3Book overdraft 0.64 0.56 0.7

TOTAL

100 100 100

CURRENT MATURITY OF LONG TERM LIABILITIES

HEAD2007 2006 2005


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Standard charted bank - TF 1 8.77 7.35 8.47Standard charted bank - TF 2 9.34 7.80 9.02National bank of Pakistan - DF - 36.78 63.54MCB bank limited - DF 29.24 24.52 14.12

Bank Alfalah limited - TF 26.31 22.0 -Habib bank limited - DF 26.31 - -Suppliers credit - 1.0 4.85

TOTAL100 100 100


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RATIO ANALYSIS

PROFITIBILITY RATIOS

FY07 FY06 FY05

GROSS PROFIT MARGIN 13.45% 12.80%

13.70%

We can see the gross profit margin

ratios of three consecutive financial years. In FY 05 it is

relatively good than that of other two financial years. But


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which is really good it will depend on the expenses which will

appear later.

OPERATING PROFIT RATIO

13.56% 12.07%

12.64%

Here are the operating profit ratios

of the company. They have minutely changed i.e. we can

say that a minute amount of money is spent on the selling,

administration and distribution cost of sales. But it isnt like

that actually the great difference isnt because of the otheroperating of the company. We can even see that in year 07

where gross profit margin is 13.5 and the operating profit

margin is 13.56. Mean it has increased just because of its

other operating income factor. In year 07 the other operating

income of the company is much more than the company

selling, distribution, administration and other expenses. So

its a good sign but company must not always depend on

these incomes.

FY07 FY06 FY05

NET PROFIT BEFORE TAX


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10.14%

6.9% 8.97%

Net profit after tax ratio is as given

where we can almost 3% of the profit of the year 07 hasbeen paid in amount of financial charges & much amount

was paid in years 06 & 05. Mean the borrowings in current

year were reduced by the company and this has reduced the

amount to be paid in the form of finance cost. This is a good

sign for all of parities related with the company because it is

mostly working on its own resources rather than on

borrowed money.

NET PROFIT AFTER TAX

8.33%

5.48% 7.04%

The ultimate earning of the

company after paying all the expenses is given above. The

best earning is shown in year 07 as compared to the other

years. Mean that company is going right now in its best

position in terms of profit & will enjoy the confidence of the

creditors, investors and other related parties.

RETURN ON EQUITY

13.20%

8.58% 8.21%

There is a significant change in ROE ofthe company in the year 07 as compared to the year 06 and

year 05. Mainly it is because of the increase in the increase

in the profit of the company. It is a good sign for all of the

people who are related with the company in any way. So in


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future company can enjoy its credibility among its creditors

and investors as well.

FY07 FY06 FY05

RETURN ON INVESTMENT

12.25%

8.39% 8.21%

The return on investment of the

company is significantly increased in year07 as compared to

the year 06 and 05. The cost of borrowing is 11.06 percent.So it is relatively good return on equity for company as

compared to its cost of borrowing. We can see the company

is earning a profit of almost 1.25% on utilizing its

borrowings. So a profit is always good one so its a good

financial position of the company.

EARNING PER SHARE

25.82

14.42 12.57

Currently the best earning per share is

going on the basic value of the share which is 10 rupees per

share written in balance sheet. And company has declared a

dividend of 25% cash on its basic value i.e. 2.50 rupees

which I think isnt good .the company must pay muchtowards its share holders but on the other hand it is good

because it will use that money to be used again in operation

of company. It will reduce the expenses of in terms of

finance cost.

P/E RATIO


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The P/E ratio of the company in the year 07 is 8.59.

mean we are paying 8.59 rupees to earn one rupee in return

from the company. It is very much decent amount of P/E

ration of the company. The more the low is this ratio the

more it is beneficent for the investors. So it is a very goodP/E ratio and will surely attract the investors.

FY07 FY06 FY05

CURRENT RATIO

1.03:1

1.03:1 1.06:1

The current ratios of the company are given

above and dont look good to me. As we can see that

company is almost working on the loaned money which it

has got through different means. Working capital is almostzero of the company. Its an alarming situation for the short

run creditors of the company that if company defaults from

where they will get there money. Looking this ratio the

creditors would be in fix wheather to give further loan to

company or not. Company must reduce its current liabilities

and increase its net working capital in order to gain the

advantage of the creditors.

QUICK RATIO

0.45:1

0.40:1 0.35:1

The most portion of the company belongs to

the inventories and prepayments because the current ratio


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when converted into quick ration is less than the half of the

current ratio. And its a god sign in a sense that when

company has to obtain loan against pledge then a large

amount of inventory is available for this purpose. But it gives

the sense that is manufacturing but not selling which doesntgive good impression. Main purpose is to sell and get profit

not to pile up the good downs.

DEBT-EQUITY RATIO

29.58:70.42

29.69:70.31 30.10:69.9

The debt equity ratio of the company is

almost constant one as we can see. We can see that debts

account for 29.58

FY07 FY06 FY05

Percent in assets value and 70 percent is the share of the

company. Mean it shows that company has so much

resources that most part of the its fixed assets are paid bycompany itself. And it has got a good financial leveragre.

More over if there had been more debts than there would be

more financial expenses to be paid by the company which

will ultimately reduce the profit of the company.

DEBT SECURITY RATIO

1.33

1.33 0.74

The debt security ration of the

company is very good one. It can be seen that for every debt

of rupee one company has offered a security of 1.33 rupees.

It a very good assurance to creditors for the recovery of their


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loan. More the security the company will offer the more it

will be earning the credibility among the creditors.

DEBT SECURITY COVERAGE RATIO

1.030.58 -

The debt service

coverage ration of the company is neither good nor bad. The

sources are just equal to pay all the debts of the company in

a single time. Its an alarming situation for the creditors to

make it clear the if company makes any fault then from

where they will get there money.

ASSETS TURN OVER RATIO

1.99

1.76 1.33

The assets turn over ratio of the

company in year 07 is an ideal one. We can see that

company has sold the thing double

FY07

FY06 FY05

in amount as compared to the its operative fixed assets. It is

a good sign that operating assets of the company are not

idle but is working.

DAYS RECIEVEBLE

57.91

51.79 62.27


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We can see that company is selling almost

two months of its things on credit. Its relatively not a good

and not a bad situation. Company must increase its sales in

terms of cash sales and reduce credit sales as much as

possible. Because credit sales can lead into bad debts infuture.

DAYS INVENTORY

13 15

16

Its a good sign that company maintains a

very low level of the finished good inventory. It will reduce

the holding cost of the company which will ultimately result

in increase in profit. Another thing we can conclude that

what ever company produces is immediately sold and

delivered to the purchasers.


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FINANCIAL ANALYSIS

OF


PRESENTED TO

Sir FIDA HUSSAIN BUKHARI

PREPARED BY

MUBASHER NAZIR

(M06BBA014)

BBA (B&F) 4TH SEME

UNIVERSITY OF THE PUNJAB

sapphire fibres limited

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