colony mills

The Islamia University of Bahawalpur

1

REPORT ON

ANALYSIS OF FINANCIAL STATEMENTS

COLONY MILLS LTD

Subject “Analysis of financial statements”

Name of company “Colony mills ltd”

Submitted To; Ma’am Sobia Tehreem Submitted by; ) Hira Manzur (118)

2

The amount of knowledge in the world had been

doubled every ten years in last century , and in turn of

21st century , it will be doubling every five years. This

report actually includes the complete knowledge of

analysis of financial statements. The company which is

selected by us for that purpose is Colony Textile Mills.

This report actually a part of our MBA program, because

it is actually related to practical knowledge, which will

give us an experience of analysis of financial

statements. We tried our best to prepare that report

with the hope that we shall take our department to a

new height, where it is rated as the best in all spheres

of education sectors and everyone concerned feels

proud of being its integral parts.

HIRA MANZOOR

4

At first, I am very thankful to Almighty Allah, who make us

sensible and gives us the ability to seek knowledge. After that,

I am thankful to Prof. Dr. Bilal .A. Khan , Vice chancellor of

Islamia University Bahawalpur , who tried his best to promote

the concept of practical knowledge in the department of

management sciences.

After that , I am very thankful to Ma’m Sobia Tehreem ,

because due to her strong efforts , we became able to complete

that analysis of the financial statements of colony textile mills .

Ma’m Sobia Tehreem actually provided us a platform , which

will give us confidence , courage and capability in the current

era of rapid changes.

5

Table of contents

Sr. No

DescriptionPage numb

er

1. Table of Annexure

2. Executive summary

3. Overview of Industry

4. Introduction of Company

5. Summarized Income Statement

5.1 Summarized Balance Sheet

6. Statement of Cash Flow

7. Ratio Analysis

7.1 Classification of Ratios

7.2 Liquidity Ratio

7.3 Leverage Ratios

7.4 Profitability Ratio

7.5 Du-Pont Analysis

8. Bankruptcy model

9. SWOT Analysis

10. Suggestions and Recommendation

6

Table of annexure

Sr. No DescriptionPage

number

1. Income Statement

2. Summarized Income Statement

3. Summarized Income Statement(Trend analysis)

4. Summarized Income Statement(Horizontal analysis)

5. Balance Sheet

6. Summarized Balance Sheet

7. Summarized Balance Sheet(Trend analysis)

8. Summarized Balance Sheet(Horizontal analysis)

7

To excel in delivering highest standards

quality yarn to customers in the local and

international markets as per their

customized needs.

8

A growth oriented company to provide

quality yarn to customers and expand sales

through good governance, explore new

markets, quality control by developing a

team for sustainable and equitable growth

with a concept of ”one window solution”

9

EXECUTIVE SUMMARY Prior to the detail description we are starting the

summary of our report. To review the executive summary the

basic purpose is to give the clear idea about what report

actually contains and efforts made behind the completion of

report.

It was assigned us to analyze the

Financial Statement of the manufacturing Companies. We

choose a well reputed company COLONY MILLS LTD. In this

report we have to point out different factors that are necessary

to make any investment decision. We start work in different

phases that are recasting, trend analysis and ratios. We also

take market views about COLONY MILLS Limited. . By working at

this company we find so many useful insights about

manufacturing sector.

Manufacturing Industry sector has a

good impact economy of Pakistan. This is most growing industry

of Pakistan. This sector contributes a major portion to our

export and also the total Gross Domestic Product (GDP). This

sector gives great employment to our population.

Company is planning to diversify its business so

to have more benefits to its stakeholders.

SWOT analysis is also a part of this report. This

shows company’s strengths, weaknesses, opportunities and

threats.

11

INTRODUCTION OF COLONY MILLS Colony Mills Limited is a Pakistan-based company. The

Company is principally engaged in the manufacturing and sal

of yarn. It offers a variety of yarn including carded and

combed, slab and core yarn, single and double yarn, made

from 100% cotton and synthetic material, catering to the

needs of knitting and weaving consumers in domestic and

international markets.

The Colony Group is one of Pakistan's oldest and

the most revered business groups. The Group has grown

phenomenally and has become a leading player in all the

sectors in which it operates. The Group has set up different

companies whose activities span various sectors like Textiles,

Sugar and Distillery.

HISTORY OF COLONY MILLS

The Colony Group was founded in 1986 with a focus on

providing high net worth families and individuals with intelligent

wealth management and investment guidance. Since its

founding, the firm has grown substantially, attracting corporate

and institutional clients.

Recognizing the importance and success of its

investment management capabilities, The Colony Group

established Colony Investment Management as a separate

division, through which it has built an experienced, talented

13

team of Chartered Financial Analysts and other investment

professionals dedicated to delivering out performance over full

market cycles. Our proprietary, research-intensive approach is

implemented through a defined, systematic, and repeatable

investment process.

OFFICERS AND DIRECTORS

Fareed M. Shiekh > Chairman of the Board, Chief Executive

Mehboob Ahmad > Chief Financial Officer

Waqar Ibn Zahoor Bandey >

Company Secretary

Najeeb Ullah Khan > Head - Internal Audit

M. Akram Qureshi > Director

Muhammad Farooq > Director

Syed Arif Hussain > Director

Muhammad Azam Barki >

Director

14

Malik Sohail Ahmed >

Director

ADDRESS.

Ismail Aiwan-e-Science Bldg 205, Ferozepur Road Lahore, 54600 Pakistan.

15

Products of colony mills.

TextileSugar.

COLONY TEXTILE MILLS LIMITED.Established as a textile manufacturing unit on 24th August, 1946, Colony

Mills Limited is engaged in the production and manufacturing of different

types of yarns of various counts. The company has a healthy portfolio of

income generating assets that crossed total revenues of 7.0 billion

rupees in the year ending June 2008.

Product Range100% cotton carded and combed yarns, lycra/spandex core spun and

slub yarns

100% polyester and 100% viscose yarns along with various blends,

polyester viscose yarn, and yarns of polyester cotton and polyester

viscose blends in the range of 6 to 80 Ne (Number English) Counts.

Future VenturesA state-of-the-art Open-End Spinning production facility is under

construction. It will be the first of its kind facility in the country, with

2,880 rotors capable of producing 15,000 Metric Tons of yarn

annually, including slub yarns.

16

Colony Sugar Mills Limited

In a continued bid to diversify its portfolio, the Colony Group

recently acquired two sugar plants in Phalia and Mian Chanu:

Colony Sugar Mills Limited (Mian Channu)

Operations

Conversion of Sugarcane into refined sugar

Crushing Capacity

4,500 Metric Tons per day of Sugarcane

Projected Annual Turnover

Over Rs. 1.00 Billion or US$ 15 Million

Colony Sugar Mills Limited (Phalia)

Operations

Conversion of Sugarcane into refined sugar

Production of Ethanol from the refined sugar waste

Crushing Capacity

7,500 Metric Tons per day of Sugarcane

Distillery Plant Capacity

125,000 liters per day of Ethanol.

17

SOCIAL RESPONSIBILITY OF COMPANY.

At COLONY, we believe in business with integrity and social

responsibility. One of our main corporate objectives is to pursue

ethical growth in business.

Effective Waste Management Systems at all the production

plants.

Awarded Oeko-Tex Standard-100 as recognition for our continued attention for environmental concerns

Our policies are not restricted to environment only; therefore, we

are engaged in a continuous effort to reduce under age employment

from our production facilities.

INTERNAL STRUCTURE/COMMITIES OF COLONY MILLS LIMITED

The different comities of colony mills are as follows.

Audit Committee.

This is the most effective and prime committee of the board,it

has the ital role in the compliance of the internal controls so as

to safeguard he interests of company through monitoring of

internal audit functions and risk management policies.

Executive Committee.

This committee is responsible for setting overall corporate

objectives and strategies, Identification of

18

opportunities ,monitoring the business strategies and plans and

there after the successful implementations of those plans.

Human resource committee.This committee determines the compensation package for all

cadres of the company s employee. The committee is also

responsible to create and maintain conductive working

environment that instill trust & ensure respect, fair treatment

and development opportunity.

Technical Committee.The technical committee acts in an advisory capacity to the

CEO, Provides recommendations relating to technical affairs to

the company, formulation of technical policies required under

the code of corporate governance.

Finance committee.The role of finance committee is to review and recommend the

financial targets, annual and quarterly budgets, approval of

expenditures for amounts with in its limits, investment of the surplus

funds of the company and financial policies.

Corporate Governance.

19

The management ensured that all requirements of the code of

corporate governance were compiled with the statement of

compliance with best practices of code of corporate governance

is annexed.

Acknowledgment.Our team of workers, supervisors and managers is greatly

appreciated for their commitment, dedication and consistent

hard work.

20

COLONY MILLS LTD INCOME STATEMENT AS ON 30,june, 200__

Colony mills limitedSummarized Balance Sheet

As On 30,june,200___

2005 2006 2007 2008

Rs.(000) Rs.(000) Rs.(000) Rs.(000)

ASSETS CURRENT ASSETS

Cash & Bank Balance 65352792 4419673 4414338 32066725

Short Term Investment 146685782 812209813 433627562 466030145

Trade Debts 192852005 166085822 305086776 331929726

Loans & Advances 126920420

Short Term Deposits 479330738

Other Receivable 12082974 174612533 504451730 793984464

Stores & Spares 29631906 64802911 73473064 120827747Tax Refunds due from Government

11560127 42140864 83795404 122130069

Stock in Trade

Raw Material 610612647 869248471 1092423524 1606823241Working in Process

71558000 80378369 89887439 87496286

Finish Goods 308959531 284348296 210140198 265973244

Assets held for disposal 318422562 484322562Real etate property held for trading

491215801

Total Current Assets 2055546922 2816669314 3281622597 4318477448

FIXED ASSETS

Work in Progress 415822597 281606595 267457672 1284218441

Plant & Machinery at cost 2829766453 2565266237 3946861781 4705633505

Less: Depreciation 471957286 471957286 775926523 926890172

2357809167 2093308951 3170935258 3778743333

Other 471957286 2578278895 2385825526 2463964046

Total Fix Assets 3245589050 4953194441 5824218456 7526925820

Long Term Security Deposit 16716122 2451716 18576122 787243175

Long Term Investment 3133116 18111122 4525998 18576123

Total Assets 5320985210 7790426593 9128943173 12651222566

LIABILITIES & EQUITY

21

CURRENT LIABILITIES

Trade & Other Payables

Creditor 55732274 203703650 557745562 1965521987

Bills Payable 721273762 155321385 606225694Advance Payments

7709133 27891258 2211614 19486443

Other 87102659 85230590 95733842 113093543Total Trade & other Payables

871817828 472146883 1261916712 2098101973

Accured Interest & Mark Up 68832214 88489407 96132098 167589397

Short Term Borrowing 799537736 1866403904 1592203909 2264788587

Tax 64786639 48290819 28999380 35907313Current Portion of Non Current Liabilities

208404027 291884397 262529592 539916788

Provision against contingent liabilities

31417382

Total Current Liabilities 2013378444 2798632792 3241781691 5106304058

NON CURRENT LIABILITIES

Loan from related parities 45454920

Liabilities against asset 12099318 44019429 74154515 132569317

Long term financing 1089550531 1974621760 2415894313 4179440783

other 912529335 340051740 248050727 326557758

2059634104 2358692929 2738099555 4638567858STOCK HOLDER EQUITY

Issued Capital 250000000 2441763000 2441763000 2441763000

Capital Reserve 157738584 191337872 707298927 464587650

unappreciated profit 338622672

Total Equity 746361256 2633100872 3149061927 2906350650

Surplus on Fix Asset 501611406

Total Liabilities & Equity 5320985210 7790426593 9128943173 12651222566

22

RATIO ANALYSISRatio analysis is a widely used tool of financial analysis. It

is defined as the systematic use of ratio to interpret the

financial statements so that the strengths and weaknesses of a

firm, as well as its historical performance and current financial

condition can be determined.

A complete ratio analysis shows a whole snap of the whole

activities of the company during the year. A ratio becomes

meaning full when compared with other standard and the ratio

of the other years. So for this purpose we have calculated the

ratio of COLONY MILLS and compare it with the previous year

and brief them according to our knowledge.

PURPOSES:

The recommendation of ratio analysis depends

upon the stake holder’s position and relation to the company for

which the analysis is done. The following paragraph briefly

explains the purpose of ratio analysis stage by stage.

MANAGEMENT: Would like to know the operational efficiency

during the year and would think of such ratios as return on

investment, turnover of fixed assets and net profit to sales etc.

24

CREDITORS:

Would like to know the ability of the company to

meet its current obligations and, therefore, would think of

current and liquid ratios, turnover of receivables, coverage of

interest by the level of earnings, etc

INVESTORS:

Will be interested in such ratios as earnings per

share, book value per share and dividends per share etc.

25

CLASSIFICATION OF RATIOS

Ratios may be classified in a number of ways keeping in view

the particular purpose. To achieve the above purposes

effectively ratios may be classified as:

1. Liquidity ratios:

Working Capital

Current Ratio

Account Receivable Turnover

Accounts Receivable Turnover in days

Inventory Turnover

Inventory Turnover in day

Sales to Working Capital

Operating Cycle

Acid -Test Ratio

2. Leverage /Solvency Ratios.

Debt ratio

Debt Equity Ratio

Time Interest Earned Ratio

Fixed Coverage Ratio

3. Profitability ratios.

Gross Profit Margin

Operating Profit Margin

Net Profit Margin

Total Asset Turnover

Return on Assets

26

Operating Asset Turnover

Return on Operating Assets

Sales to Fixed Assets

Return on Total Equity

Return On investment

27

CURRENT RATIO=CURRENTASSETS/CURRENT LIABILITIES

2005 2006 2007 2008

CUURRENT ASSETS205554692

2281666931

4 3281622597 4318477448

CURRENT LIABILITIES201337844

4279863279

2 3241781691 5106304058

CURRENT RATIO1.02094413

91.0064447

621.01228981

80.8457149

04 QUICK ACID RATIO=QUICK ASSETS/CURRENT LIABILITIES

QUICK ASSETS 106441674

4158269417

8 1889171436 2358184677


4279863279

2 3241781691 5106304058

QUICK RATIO0.52867196

80.5655240

60.58275714

30.4618183

03WORKING CAPITAL=CURRENT ASSETS-CURRENT LIABILITIES


2281666931

4 3281622597 4318477448


4279863279

2 3241781691 5106304058

WORKING CAPITAL 42168478 18036522 39840906 -787826610

CASH RATIO=CASH+MRK SECURITIES/CURRENT LIABILITIES

CASH 65352792 4419673 4414338 32066725

MRK SECURITIES 146685782 812209813 1336742 466030145


4279863279

2 3241781691 5106304058

CASH RATIO0.10531481

30.2917958

680.00177404

90.0975454

78

A/R TURNOVER=ANNUAL CREDIT SALES/AVG A/R

ANNUAL CREDIT SALES334940675

2205588069

4 578505405 7020729542

AVG A/R 150073976 239850875 575118430 979371758

A/R TURNOVER22.3183715

28.5714954

931.00588917

87.1686052

66

AVG COLLECTION PERIOD=360/A/R TURNOVER


28.5714954

9 1.00588918 7.16860527

AVG COLLECTION PERIOD16.1302091

341.999672

1357.892307

850.218973

77

INVENTORY TURNOVER=CGS/AVG INVENTORY

CGS297926922

0177610450

3 5046353813 6026504807

AVG INVENTORY 990382399 1112552657 1313213149 167637196

6

INVENTORY TURNOVER3.00820089

61.5964228

683.84275303

43.5949687

36

AVG OF INVENTORY=360/INVENTORY TURNOVER


61.5964228

7 3.84275303 3.5949687

AVG OF INVENTORY119.672858

4225.50416

1193.6828355

1100.13995

39SALES TO WORKING CAPITAL=SALES/WORKING CAPITAL

SALES 334940675

2205588069

4 5784505405 7020729542

WORKING CAPITAL 42168478 18036522 39840906 -

29

787826610

SALES TO WORKING CAPITAL

79.42915919

113.9843199 145.190107

-8.9115161

29OPERATING CYCLE=A/R Turnover in days + Inventory Turnover in days

A/R Turnover in days 16.1302091

341.999672

1357.892307

850.218973

77

Inventory Turnover in days119.672858

4225.50416

1193.6828355

1100.13995

39

OPERATING CYCLE135.803067

5267.50383

32451.575143

3150.35892

77

30

Current Ratio: Current Ratio =

2005 2006 2007 20081.02094413

91.006444

761.01228981

80.845714

9

C U R R E N T R A T IO

0

0 . 2

0 . 4

0 . 6

0 . 8

1

1 . 2

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

TIM

ES

INTERPRETATION:

The current ratio is the ratio of total current assets and total

current liabilities. The current ratio of a firm measures its short-

term solvency, i.e. its ability to meet short-term obligations. As

a measure of short term/current financial liquidity, it indicates

the rupees of current assets available for each rupee of current

liability / obligation. The higher the current ratio, the large the

amount of rupees available per rupee of current liability, the

more the firm’s ability to meet current obligations and the

greater the safety of funds of short term creditors .And in

Colony Textile mills ltd the current ratio is decreasing from

31

2005 to 2008.it shows that co has poor short term debt paying

ability.

32

Acid -Test Ratio

Acid -Test Ratio=

2005 2006 2007 20080.52867196

80.565524

060.58275714

30.461818

3

Q U IC K A C ID R A T IO

0

0 . 1

0 . 2

0 . 3

0 . 4

0 . 5

0 . 6

0 . 7

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

TIM

ES

INTERPRETATION:The term quick assets refers to current assets which can be

converted into cash immediately or at a short notice without

dimension of value. Thus, the quick assets = current assets -

inventory. This ratio is used to check that how much inventory

is unsold and includes in current assets. Because current assets

may include inventory in large amount which would increase

the current assets. This ratio shows a minor increase from 2005

to 2006 and 2007, but in 2008 it decreases.

33

Working capital:

Working Capital =Current Assets –Current Liabilities

2005 2006 2007 2008

421684781803652

2 398409067878266

10

w o r k i n g c a p i t a l

- 1 0 0 0 0 0 0 0 0 0

- 8 0 0 0 0 0 0 0 0

- 6 0 0 0 0 0 0 0 0

- 4 0 0 0 0 0 0 0 0

- 2 0 0 0 0 0 0 0 0

0

2 0 0 0 0 0 0 0 0

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

y e a r s

Rs

INTERPRETATION:Working capital indicates the short run solvency position of the

business. As shown above the net working capital decreases

from 2005 to 2006 but improves in 2007, but goes – tive in

2008 which gives a warning to company.

34

CASH RATIO :

CASH RATIO= CASH+MRK SECURITIES/CURRENT LIABILITIES

C A S H R A T IO

0

0 . 0 5

0 . 1

0 . 1 5

0 . 2

0 . 2 5

0 . 3

0 . 3 5

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

TIM

ES

INTERPRETATION:

Cash ratio indicates that how much mot liquid assets a

company have to fulfill its current liabilities. Increasing trend is

favorable and vive versa. In Colony textile this ratio increases

from year 2005 to 2006 but it’s a minor increase and in 2007 it

shows a minor decrease and it increases in 2008.

2005 2006 2007 20080.10531481

30.291795

870.00177404

90.097545

48

35

Accounts Receivable Turnover:

Account Receivable Turnover =

2005 2006 2007 200822.3183715

28.571495

491.00588917

87.168605

27

A / R T U R N O V E R

0

5

1 0

1 5

2 0

2 5

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

TIM

ES # R E F !

INTERPRETATION:

This ratio shows the proportion of sales to receivable. It means

that how many times in a year our receivables are collected. It

shows the credit management and collection management

ability that how much they are efficient to collect the

receivables. There is a decrease in A/R Turnover from year 2005

to 2007 but in 2008 it improves and increases.

36

Accounts Receivable Turnover in days:

Accounts Receivable Turnover in days =

2005 2006 2007 200816.1302091

341.99967

21357.892307

850.21897

38

A V G C O L L E C T I O N P E R I O D

0

5 0

1 0 0

1 5 0

2 0 0

2 5 0

3 0 0

3 5 0

4 0 0

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

DA

YS

# R E F !

INTERPRETATION:

This ratio indicates that how many days’ receivables are

collected. It shows credit collection management ability that

how much they capable to get receivables. In Colony Textile in

increases from 2005 to 2007 but it decreases in 2008.

37

Inventory Turnover:

Inventory Turnover =

I N V E N T O R Y T U R N O V E R

0

1

2

3

4

5

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

TIM

ES

INTERPRETATION:

This ratio reveals the number of times finished stock is turned

over during a given accounting period. In other words this ratio

indicates that how many times in a year inventory can be

converted into sales. High inventory turnover ratio is better

than a low ratio. A high ratio implies good inventory

management. In Colony textile inv turnover decreases from

year 2005 to 2006 but in 2007 it improves and in 2008 there is

a minor decrease in inv turnover.

2005 2006 2007 20083.00820089

61.596422

873.84275303

43.594968

74

38

Inventory Turnover in days:

Inventory Turnover in days =

A V G O F IN V E N T O R Y

0

5 0

1 0 0

1 5 0

2 0 0

2 5 0

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

DA

YS

INTERPRETATION:

This ratio shows us that for how many days the inventory

remains with the company after its conversion from raw

material and work in process to finished goods. The lower the

ratio better it is. This is calculated by dividing the 365 by

inventory turnover. The standard of day inventory in stock is

that lower the days the higher the performance. In Colony

textile the inventory turnover in days first increases from 2005

to 2006 but it decreases in 2007, and in 2008 it again shows an

increase.

2005 2006 2007 2008119.672858

4225.5041

6193.6828355

1100.1399

54

39

Sales to working Capital ::

Sales to working Capital =

2005 2006 2007 200879.4291591

9113.9843

2 145.1901078.911516

1

INTEPRETATION:

Sales to working give an indication of the turnover in working

capital per year. A low working capital turnover ratio indicates

an unprofitable use of working capital. In other words sales are

not adequate in relation to the available working capital. In

Colony textile this ratio shows a rapid increasing trend from

year 2005 to 2007 but shows a sharp decrease in 2008 even it

goes to –tive.

40

Operating Cycle:

Operating Cycle = A/R Turnover in days + Inventory

Turnover in days

2005 2006 2007 2008135.803067

5267.5038

33451.575143

3150.3589

28

INTEPETATION:

The operating cycle represents the period of time elapsing

between the acquisition of goods and the final sash realization

resulting from sales and sub sequent collections. The operating

cycle should be helpful when comparing a firm from period to

period. In the company this ratio first shows increase from 2005

to 2007 but it decreases in 2008.

41

Current Ratio:

Current Ratio =

C U R R E N T R A T IO

0

0 . 2

0 . 4

0 . 6

0 . 8

1

1 . 2

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

TIM

ES

INTERPRETATION:

The current ratio is the ratio of total current assets and total

current liabilities. The current ratio of a firm measures its short-

term solvency, i.e. its ability to meet short-term obligations. As

a measure of short term/current financial liquidity, it indicates

the rupees of current assets available for each rupee of current

liability / obligation. The higher the current ratio, the large the

amount of rupees available per rupee of current liability, the

more the firm’s ability to meet current obligations and the

greater the safety of funds of short term creditors .And in

Colony Textile mills ltd the current ratio is decreasing from

2005 to 2008.it shows that co has poor short term debt paying

ability.

2005 2006 2007 20081.02094413

91.006444

761.01228981

80.845714

9

42

Acid -Test Ratio

Acid -Test Ratio=

2005 2006 2007 20080.52867196

80.565524

060.58275714

30.461818

3

Q U IC K A C ID R A T IO

0

0 . 1

0 . 2

0 . 3

0 . 4

0 . 5

0 . 6

0 . 7

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

TIM

ES

INTEPETATION:

The term quick assets refers to current assets which can be

converted into cash immediately or at a short notice without

dimension of value. Thus, the quick assets = current assets -

inventory. This ratio is used to check that how much inventory

is unsold and includes in current assets. Because current assets

may include inventory in large amount which would increase

the current assets. This ratio shows a minor increase from 2005

to 2006 and 2007, but in 2008 it decreases.

43

Working capital:

Working Capital =Current Assets –Current Liabilities

w o r k i n g c a p i t a l

- 1 0 0 0 0 0 0 0 0 0

- 8 0 0 0 0 0 0 0 0

- 6 0 0 0 0 0 0 0 0

- 4 0 0 0 0 0 0 0 0

- 2 0 0 0 0 0 0 0 0

0

2 0 0 0 0 0 0 0 0

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

y e a r s

Rs

INTERPRETATION:

Working capital indicates the short run solvency position of the

business. As shown above the net working capital decreases

from 2005 to 2006 but improves in 2007, but goes – tive in

2008 which gives a warning to company.

2005 2006 2007 2008

421684781803652

2 398409067878266

10

44

CASH RATIO :

CASH RATIO= CASH+MRK SECURITIES/CURRENT LIABILITIES

2005 2006 2007 20080.10531481

30.291795

870.00177404

90.097545

48

C A S H R A T IO

0

0 . 0 5

0 . 1

0 . 1 5

0 . 2

0 . 2 5

0 . 3

0 . 3 5

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

TIM

ES

INTERPRETATION:

Cash ratio indicates that how much mot liquid assets a

company have to fulfill its current liabilities. Increasing trend is

favorable and vive versa. In Colony textile this ratio increases

from year 2005 to 2006 but it’s a minor increase and in 2007 it

shows a minor decrease and it increases in 2008.

45

Accounts Receivable Turnover:

Account Receivable Turnover =

A / R T U R N O V E R

0

5

1 0

1 5

2 0

2 5

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

TIM

ES # R E F !

INTERPRETATION:

This ratio shows the proportion of sales to receivable. It means

that how many times in a year our receivables are collected. It

shows the credit management and collection management

ability that how much they are efficient to collect the

receivables. There is a decrease in A/R Turnover from year 2005

to 2007 but in 2008 it improves and increases.

2005 2006 2007 200822.3183715

28.571495

491.00588917

87.168605

27

46

Accounts Receivable Turnover in days:

Accounts Receivable Turnover in days =

2005 2006 2007 200816.1302091

341.99967

21357.892307

850.21897

38

A V G C O L L E C T I O N P E R I O D

0

5 0

1 0 0

1 5 0

2 0 0

2 5 0

3 0 0

3 5 0

4 0 0

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

DA

YS # R E F !

INTERPRETATION:

This ratio indicates that how many days’ receivables are

collected. It shows credit collection management ability that

how much they capable to get receivables. In Colony Textile in

increases from 2005 to 2007 but it decreases in 2008.

47

Inventory Turnover:

Inventory Turnover =

I N V E N T O R Y T U R N O V E R

0

1

2

3

4

5

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

TIM

ES

INTERPRETATION:

This ratio reveals the number of times finished stock is turned

over during a given accounting period. In other words this ratio

indicates that how many times in a year inventory can be

converted into sales. High inventory turnover ratio is better

than a low ratio. A high ratio implies good inventory

management. In Colony textile inv turnover decreases from

year 2005 to 2006 but in 2007 it improves and in 2008 there is

a minor decrease in inv turnover.

2005 2006 2007 20083.00820089

61.596422

873.84275303

43.594968

74

48

Inventory Turnover in days:

Inventory Turnover in days =

A V G O F IN V E N T O R Y

0

5 0

1 0 0

1 5 0

2 0 0

2 5 0

2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Y E A R S

DA

YS

INTERPRETATION:

This ratio shows us that for how many days the inventory

remains with the company after its conversion from raw

material and work in process to finished goods. The lower the

ratio better it is. This is calculated by dividing the 365 by

inventory turnover. The standard of day inventory in stock is

that lower the days the higher the performance. In Colony

textile the inventory turnover in days first increases from 2005

to 2006 but it decreases in 2007, and in 2008 it again shows an

increase.

2005 2006 2007 2008119.672858

4225.5041

6193.6828355

1100.1399

54

49

Sales to working Capital :

Sales to working Capital =

INTEPRPETATION:

Sales to working give an indication of the turnover in working

capital per year. A low working capital turnover ratio indicates

an unprofitable use of working capital. In other words sales are

not adequate in relation to the available working capital. In

Colony textile this ratio shows a rapid increasing trend from

year 2005 to 2007 but shows a sharp decrease in 2008 even it

goes to –tive.

2005 2006 2007 200879.4291591

9113.9843

2 145.1901078.911516

1

50

Operating Cycle:

Operating Cycle = A/R Turnover in days + Inventory

Turnover in days

INTEPETATION:

The operating cycle represents the period of time elapsing

between the acquisition of goods and the final sash realization

resulting from sales and sub sequent collections. The operating

cycle should be helpful when comparing a firm from period to

period. In the company this ratio first shows increase from 2005

to 2007 but it decreases in 2008.

2005 2006 2007 2008135.803067

5267.5038

33451.575143

3150.3589

28

51

Debt ratio=Total liabilities/Total assets 2005 2006 2007 2008

Total liabilities 4073012548515732572

1597988124

6974487191

6

Total assets 5320958210779042659

3912894317

3126512225

66

Debt ratio 0.7654659910.662008

1270.655046

3870.7702711

63

Debt to equity ratio=Total liabilities/Shareholder's equity


1597988124

6974487191

6

Shareholder's equity 746361256 263310087

2 314906192

7 290635065

0

Debt to Equity ratio 5.4571596731.958651

0251.898940

5053.3529580

87

Debt to tangible net worth ratio=T.liabilities/O.E-Intangible assets


1597988124

6974487191

6


2 314906192

7 290635065

0

Intangible assets 0 0 0 0

Debt to tangible net worth ratio 5.4571596731.958651

0251.898940

5053.3529580

87

current debt to net worth ratio=current liabilities/O.E

Current liabilities 2013378444279863279

2324178169

1510630405

8


2 314906192

7 290635065

0

Current debt to net worth ratio 2.6975923891.062865

7721.029443

6141.7569470

01

Total capitilization ratio=LTD/LTD+equity

LTD 2059634104235869292

9273809955

5463856785

8

Equity 746361256 263310087

2 314906192

7 290635065

0

Total capitalization ratio 0.7340119420.472514

0950.465096

730.6147936

33

Fixed asset to equity ratio=Fixed asset/Shareholder's equity

Fixed assets 3245589050495319444

1582421845

6752692582

0


2 314906192

7 290635065

0

Fixed asset to equity ratio 4.3485497461.881125

9731.849509

0262.5898202

68

Time interest earned ratio=EBIT/Interest

EBIT 2646676555 212720950 530687771 674774732

Interest 129235123 178660925 371807572 491568948

Time interest earned ratio 20.479545291.190640

5951.427318

3521.3726960

07

FIXED CHARGE COVERAGE RATIO

EBIT 2646676555 212720950 530687771 674774732

Lease Pmt 23443822 18219485 34889562 36416568

Tax rate 40% 40% 40% 40%

53

Principle 0 0 0 0

intrest 129235123 178660925 371807572 491568948

Preferred dividened 0 0 0 0

Fixed charge coverage ratio 10.493078970.703799

1290.834395

8480.8081941

02T.ASSET TURNOVER RATIO=NET SALES/T.ASSETS

net sales 3349406752205588069

4578450540

5702072954

2

total assets 5320985210779042659

3912894317

3126512225

66

TOTAL ASSET TURNOVER RATIO 0.6294711640.2638983

460.6336445

85 0.55494475

54

Debt Ratio:

Debt Ratio =

2005 2006 2007 2008

0.7654659910.6620081

270.6550463

870.770271

16

debt ratio

0.550.6

0.650.7

0.750.8

2005 2006 2007 2008

years

tim

es

INTERPRETATION:

Debit ratio is calculated to check the total asset financed by the

firm creditors. This ratio shows relation between total assets

and total liabilities. In Colony textile this ratio shows a minor

decrease from 2005 to 2006, and in 2007 it also decreases, but

in 2008 it improves or increases.

55

Debt To Equity Ratio:

Debt Equity Ratio =

2005 2006 2007 2008

5.4571596731.9586510

251.8989405

053.352958

09

debt to equity ratio

0

2

4

6

2005 2006 2007 2008

years

tim

es

INTERPRETATION:

The debt equity ratio indicates the relationship between the

long-term funds provided by creditors and those provided by

the firm’s owners. The standard debt equity ratio is 60:40. The

lower the debt equity ratio that is preferable. This ratio

decreases from year 2005 to 2007 but it improves/increases in

2008.

56

Debt to tangible net worth ratio

Debt to tangible net worth ratio=Total liabilities/Shareholder's equity-Intangible assets

2005 2006 2007 2008

5.4571596731.9586510

251.8989405

053.352958

09

debt to tangible net worth

0

2

4

6

2005 2006 2007 2008

years

tim

es

INTERPRETATION:

This ratio tells that how much the equity portion contributes to

total liabilities. In Colony textile it decreases from 2005 to 2007,

but further it does not decrease but shows an increase in 2008.

57

current debt to net worth ratio

Current debt to net worth ratio=current liabilities/shareholder's equity

2005 2006 2007 2008

2.6975923891.0628657

721.0294436

14 1.756947

current debt to net worth ratio

0

1

2

3

2005 2006 2007 2008

years

tim

es

INTERPRETATION:

This ratio shows that how much contribution of shareholder’s

equity is in the current portion of liabilities. In this company it

shows a gradual decrease from year 2005 to 2007 but it

improves in minor in 2008.

58

Total capitalization ratio

Total capitalization ratio=LTD/LTD+equity

total capitalization ratio

00.20.40.60.8

2005 2006 2007 2008

years

tim

es

INTERPRETATION:

LTD represents a company’s huge investment so through this

ratio we check that whether company’s capital is capable of

paying the interest on long term debts. In Colony textile shows

a decrease from 2005 to 2006 and in 2007 it minor decreases

and in 2008 it improves/increases.

2005 2006 2007 2008

0.7340119420.4725140

950.465096

730.614793

63

59

Fixed asset to equity ratio

Fixed asset to equity ratio=Fixed asset/Shareholder's equity

2005 2006 2007 2008

4.3485497461.8811259

731.8495090

262.589820

27

fixed asset to equity ratio

0

2

4

6

2005 2006 2007 2008

years

tim

es

INTERPRETATION:

It shows that in fixed assets how much contributed or owned by

the shareholders equity and remaining by creditors. And in

Colony textile this ratio decreases from year 2005 to 2007, but

a minor increase also comes in 2008.

60

Time Interest Earned Ratio:

Time interest Earned Ratio =

2005 2006 2007 2008

20.479545291.1906405

951.4273183

521.372696

01

time interest earned ratio

0

10

20

30

2005 2006 2007 2008

years

tim

es

INTERPRETATION:

This ratio measures the firm’s ability to make contractual

payments this ratio is also calculated to know about long- term

solvency position of the business. This ratio indicates the

company’s ability to pay interest this company this ratio shows

a rapid decrease from 2005 to 2006 and a minor increase in

2007, and in 2008 it also decreases.

61

FIXED CHARGE COVERAGE RATIO

FIXED CHARGE COVERAGE RATIO=EBIT+Lease Pmt/Interest+Lease Pmt+ (Principle+Preferrd dividend)*(1/1-T)

2005 2006 2007 2008

10.493078970.7037991

290.8343958

480.808194

1

fixed charge coverage ratio

0

5

10

15

2005 2006 2007 2008

years

tim

es

INTERPRETATION:

This ratio shows a major decrease in 2006 but it improves in

2007, and in 2008 it again decreases.

62

Total Assets Turnover ratio:

Total Assets Turnover Ratio =

2005 2006 2007 2008

0.6294711640.2638983

460.6336445

850.554944

75

total asset turnover ratio

00.20.40.60.8

2005 2006 2007 2008

years

tim

es

INTERPRETATION:

This ratio is based on the relationship between the sales and

assets of a firm indicate that how much is contributed by assets

towards our sales. The higher the turnover ratio, the more

efficient the management and utilization of the assets while low

turnover ratios are indicate of under utilization of available

resources and presence of idle capacity. If turn over increases it

means that assets are properly used to generate sales and

company’s position is very good. In Colony textile ratio

decreases from year 2005 to 2006 but improves in 2007 and

also shows decreases in 2008.

63

2005 2006 2007 2008Financial leverage= EBIT/EBT

EBIT 310183157 291991853 830067779 854941799EBT 180948234 119330928 458269207 363372851Financial leverage

1.714209363

2.446908424

1.811310396

2.35279492

EPS=net income-Preferred dividened/No.of C/S Outstanding

Net income 106792352 104917000 513886773 281497826

Preferred dividened 0 0 0 0

weighted average

C/S outstanding 10410959 135653589 244176300 245000000

EPS10.2576863

50.77341853

42.10457269

21.1489707

2

Note There is no dilutive effect on the basic EPS of a company.

Price earning ratio=

Market price per share/EPS

Market price per share 12 13 12 14

EPS 10.25786 0.7734185 2.1045727 1.1489707

P/E ratio1.16983464

416.8084937

25.70187002

8 12.184819

% of earning retained=Net income-all divideneds/net income

Net income 106792352 104917000 513886773 281497826All divideneds 106792352 104917000 513886773 281497826% earning retained 0 0 0 0

Dividened payout ratio= Dividened per share/EPS

Dividened per share 10.26 0.77 2.1045727 1.1489707

Earning per share 10.26 0.77 2.1045727 1.1489707

Dividened payout ratio 1 1 1 1

Dividened Yield=Dividened per share/ Market price of share


Market price of share 12 13 12 14

Dividened yield 0.855 0.059230769

0.175381058

0.08206934

Book value=Total shareholder's equity-Preferred equity

Total NO.of common stock outstanding

Total shareholder's equity 746361256 263310087

2314906192

7290635065

0Preferred equity 0 0 0 0

common stock outstanding 10410959 135653589 244176300 245000000

71.68996209

19.41047702

12.89667313

11.8626557

65

FINANCIAL LEVERAGE

Financial leverage= EBIT/EBT:

2005 2006 2007 20081.714209 2.446908 1.81131 2.352795

financial leverage

0

1

2

3

1 2 3 4

Years

Tim

es

INERPETATION:

This ratio tells that how much change comes in EBIT due to

change in net income, as the interest increases or decreases he

financial leverage increases and decreases with the same

aspect. from year 2005 to 2006 this ratio increases but in 2007

it shows a decrease and it 2008 again improves.

68

EARNING PER SHARE

EPS=net income-Preferred dividend / No. of common stock Outstanding

2005 2006 2007 200810.257

60.773

42.104

5 1.148

EPS

0

5

10

15

2005 2006 2007 2008

Years

Rs.

INERPETATION:

IT tells that what a single share earns, it is a mandatory

/compulsory part of I/S. this ratio is in a good position in 2005

but it goes to much down in 2006 and in 2007 it improves but

again shows a decreasing trend in 2008.

69

PRICE EARNING RATIO:

Price earning ratio= Market price per share/EPS:

2005 2006 2007 20081.169

816.808

45.701

812.184

8

Price earning ratio

0

5

10

15

20

2005 2006 2007 2008

Years

Rs.

INERPETATION:

THIS ratio basically tells about the increase or decrease in the

market prices for good sign the market prices should increases

from EPS this ratio first shows an increasing trend from year

2005 to 2006 but in 2007 it goes down and in 2008 it increases.

70

Profitability ratios

Gross Profit Ratio = *100

Years2005 2006 2007 2008

.Gross profit

margin

11.050838

13.608581

12.76084194

14.16127383

gross profit margin

0

5

10

15

Years 2005 2006 2007 2008

Years

%

INTERPRETATION:

The gross profit ratio indicates the proportion of gross profit to

sales. Gross profit is calculated by deducting the cost of good

sold from sales. Higher the ratio, the better it is, and the lower

the relative cost of merchandise sold and better would be the

company’s position. A low ratio indicates unfavorable trends in

the form of reduction in selling prices or increase in cost of

production this ratio increases from year 2005 to 2006 but a

minor decrease appeared in 2007 and in 2008 it also increases.

72

Operating Profit Ratio

Operating Profit Ratio = *100

operating profit margin

0

5

10

15

Years 2005 2006 2007 2008

Years

%

INTERPRETATION:

This ratio measures the percentage of profit earned on sale

after deducting operating expenses from the Gross Profit. This

ratio indicates that how efficiently the expenses are being

controlled by management. The higher the margin the lower

would be the operating expenses and better would be

management ability to control expenses this ratio increases from

year 2005 to 2006 and in 2007 it decreases but recovered or increased in

2008.

Years2005 2006 2007 2008

Operating Income margin.

7.901926359

10.34695012

9.174298127

9.611176844

73

Net profit Ratio = *100

Net profit margin

02468

Years 2005 2006 2007 2008

Years

%

Interpretation:

The net profit margin shows the net % age of sales after

payment of interest and taxes from operating profit this ratio

increases from year 2005 to year 2006 and also increases in

2007 but in 2008 it decreases.

Years2005 2006 2007 2008

Net profit margin

3.188396033

5.103263059

6.960817364

4.009523858

74

Total Asset Turnover =

Years2005 2006 2007 2008

Total Assets turnover

Ratio

62.94711637

26.38983462

63.36445846

55.49447501

Total asset turnover ratio

020406080

Years 2005 2006 2007 2008

Years

%

INTERPRETATION:Total asset turnover measures the activity of the assets and the

ability of the firm to generate sales through the use of sales

there is a decreasing trend from year 2005 to 2006 but in 2007

it increases and in 2008 it again shows a decreasing position.

75

Return on Assets = *100

Years2005 2006 2007 2008

ROA2.00700336

11.34674268

24.41071472

82.22506421

5

ROI

0

1

2

3

4

5

Years 2005 2006 2007 2008

Years

%

INTERPRETATION:

The purpose of this ratio is to calculate the return that the

business is providing on total assets. This is important from

owner’s point of view that what the business is earning on its

assets, how their funds are being utilized. This ratio also

provides an indicator of overall effectiveness of management in

generating profit with the available assets .If utilization of

assets is productive the return would be high and position

would be good this ratio from 2005 to 2006 decreases but in

2007 it improves and in 2008 it again shows a decrease.

76

Operating Assets Turnover =

Years2005 2006 2007 2008

Operating Assets

Turnover

103.1987322

67.4893248

126.195727

11.8852923

Operating assets turnover

0

50

100

150

2005 2006 2007 2008

Years

%

INTERPRETATION:This ratio measures the ability of operating assets to generate

sales .If this ratio is high then it is in favor of company. It shows

the effective use of assets. It goes down in 2006 but increment

comes in 2007 but in 2008 it again goes down.

77

Return on Operating Assets =

Years2005 2006 2007 2008

Return on operating

assets

8.154687822

6.983086776

11.57757222

11.42323872

Return on operating assets

0

5

10

15

2005 2006 2007 2008

Years

%

INTERPRETATION:

This ratio gives the operating efficiency of management. This

ratio indicated how Operating assets are utilized. In other words

how much assets are used in operating activities. High Return

on Operating Asset ratio shows the efficient use of operating

assets. This ratio shows a minor decrease in 2006 but improves

in 2007 and in 2008 it again shows a minor decrease.

78

Sales to Fixed Assets=

Years2005 2006 2007 2008

Sales to fixed assets ratio

103.20 67.49 126.20 118.85

Sales ti fixed asset ratio

0

50

100

150

2005 2006 2007 2008

Years

%

INTERPRETATION:This ratio measures the firm’s ability to make productive use of

its fixed assets to generate sales. High ratio is favorable for the

Company than that of low ratio this ratio goes down from year

2005 to 2006 but increase comes in 2007 and in 2008 it also

shows a minor decrease.

79

Return on Investment = Net income / LTD+Equity

Years2005 2006 2007 2008

Return on Investment

3.805863

0.4428402

6.839487

3.730959

INTERPRETATIONThe net profit margin ignores the utilization of assets and the

total asset turnover ratio ignores profitability on sales. The

return on investment ratio or earning power resolve these short

come. Return investment measures the overall effectiveness In

generating profits with available assets. It shows a decrease

from year 2005 to 2006 but in 2007 it shows a good position

and improves but in 2008 it again goes down.

80

Du-Pont Analysis

RETUN ON EQUITY = (Net Profit Margin ×Total Asset Turnover) × (Financial Leverage Multiplier)

We need following ratios to calculate the Return on Equity.

Net Profit Ratio =

Total Asset Turnover =

Years2005 2006 2007 2008

Total Assets turnover

Ratio

62.94711637

26.38983462

63.36445846

55.49447501

Years2005 2006 2007 2008

Net profit margin

3.188396033

5.103263059

6.960817364

4.009523858

82

Financial leverage Multiplier =

Years2005 2006 2007 2008

Financial leverage Multiplier

7.129235564

2.958651025

2.898940505

4.352958085

RETURN ON EQUITY= (Net Profit Margin ×Total Asset Turnover) × (Financial Leverage Multiplier)

Years2005 2006 2007 2008

1430.84

398.4542

1278.631

968.5611

ROE

0500

100015002000

2005 2006 2007 2008

Years

%

83

DU PONT ANALYSIS:

One of the easiest way to calculate whether a company is in asset re-creator

or cash consumer is to look at the Return On Equity (ROE). The Du Pont

Analysis is a way that breaks down ROE into three parts.

Profit Margin

Asset Turnover

Equity Multiplier

DUPONT MODEL:

Sales -CGS Earning for -Operating expenses common Net profit -Interest expenses share holder/ margin -Taxes sales (ROA) Preferred Dividend Return on Asset

(ROE)Returnon

Current Asset Total Assets/ Total asset Equity Fixed asset Sales turnover *

Total Total Current liability liability asset/ Financial Long term + Common leverage Liability shareholder stock multiplier Equity equity

84

But the main analysis in it we focused on ROE and interpretation is

also based on this. The value of return on equity is given below:

RETURN ON EQUITY:

years 2004 2005 2006 2007 2008

values 34 27 9 0.3 0.7

Return on total equity

34

27

9

0.3 0.70

10

20

30

40

2004 2005 2006 2007 2008

years

Interpretation:

Dupont analysis is used to evaluate the firm effectiveness. The ROE

is decreased since 2004 to 2008 but there is a great decrease in

2006 the main reason of this decreasing trend is that in 2005 the

company face the bank kruptacy and its efficiency tremendously

decreased. In this analysis we see that firm’s working is not effective

and they never use its asset effectively and their liabilities increased

more as compared to assets.

85

Cash Flow / Total Debt

Years 2005 2006 2007 2008

Cash Flow / Total Debt 0.0

30.0018

7 0.00161 0.00691

Net Income / Total Debt

Years 2005 2006 2007 2008

Net Income / Total Debt 0.05 0.044 0.147 0.060

Total Debt / Total Assets

Years 2005 2006 2007 2008

Total Debt / Total Assets 0.387 0.3027 0.299 0.366

87

Multivariate Model

Z= X1+X2+X3+X4+X5 Where X1= Working Capital / Total Assets

Years 2005 2006 2007 2008Working Capital / Total

Assets 0.72 0.231 0.436 -6.22

X2= Retained Earning / Total Assets

Years 2005 2006 2007 2008Retained Earning / Total

Assets 0.2964 0.3779 0.3494 0.2297

X3= EBIT /Total Assets

Years 2005 2006 2007 2008

EBIT /Total Assets 0.0497 0.0273 0.0581 0.053

X4= Market value of equity / book value of Total Debt

X5=Sales / Total Assets

Years 2005 2006 2007 2008Market value of equity /

book value of Total Debt 0.362 1.11 1.15 0.626

Years 2005 2006 2007 2008

Sales / Total Assets 0.629 0.263 0.633 0.55

88

Z – Score

2005 2006 2007 2008

X₁×.012 0.00864 0.002772 0.005232 -0.07464

X₂×.014 0.00415 0.005291 0.004892 0.003216

X₃×.033 0.00164 0.000901 0.001917 0.001749

X₄×.006 0.002172 0.00666 0.0069 0.003756

X₅×.01 0.00629 0.00263 0.00633 0.0055

Z 0.018742 0.018254 0.025271 -0.06042

The formula for Z score is

Z= 0.012*x1+0.014*x2+0.033*x3+0.006*x4+0.010*x5

Z=0.018742

Standard:

If the ‘Z’ is 2.675 that company is at cut off point. If it is greater

than 2.675 than the position of the company is strong and if it is

less than 2.675 that the position of the company is weak.

89

SWOT ANALYSIS:

Each organization existing in the market analyzed though external

and internal environment has some Strengths, Weaknesses,

Opportunities and Threats called SWOT analysis. SWOT analysis

gives the overall competitive position of industry. The basic purpose

of this analysis is to identify the current strategies of the

organization and its potentials of competing in the competitive

market and capability of dealing with those changes, which are

taking place in the business environment sharply.

It gives the scenario regarding weaknesses and threats to the

company and offers the company that these should be eliminated or

reduced at least as compared to other competitors.

91

STRENGTHS:

Colony mills have a very stable yarn market with good brand

image in the eyes of customers.

colony has a strong dealer ship network and a large sales force

to cater to its needs

Certified by ISO.

WIDE production range.

Top player of TEXTILE business with max. Production capacity.

Having a strong good will.

Significant contribution towards the economic development of

the country.

Excellent environmental & working conditions.

Safety measures of international standards are exercised.

Sales growth is very high.

Export sales especially show a tremendous boost as it

increased from RS 744 MILLION last year to 2.40 BILLION.

Company maintained its position against its competitors

very successfully.

Company has strong resources to get the raw material.

92

WEAKNESSES:

Huge volume of production which may be diff icult

to handle in future.

Monetary sensit iveness to foreign exchange

market.

I t has become more chal lenging for the company

to maintain competit ive edge due to WTO regime.

Limitations in meeting up the demand of texti le.

Too much central ization bureaucratic control effects

t imely decision making.

Not strong marketing or advertisement.

Company cannot convert account receivables into

cash quickly. Mostly sales are on credit basis.

Lack of long term planning.

Colony mills has no proper framework and policy for the

recruitment of employees which result inefficiency. All the

Directors and audit committee of the Company are close

relative of the Chief Executive

Lengthy procedures in documentations.

93

OPPORTUNITIES:

A gas plant is establishing to overcome the shortage of

electricity.

Yarn and sugar is exported.

Improvement in the quality of texti le and sugar.

Expansion of plants to meet the demand more

eff iciently .

Trying to get opportunities for joint ventures with other

international companies.

Expanding the business for globalization.

Having two sugar producing plants .

. Delegation of authority so that decisions can be

made at the spot without any delay.

May diversify the business in al l ied services .may

be cost leaders by cutting down the unnecessary

expenditures.

Adding the new and fresh staff in the company to encourage

the work.

After textile and sugar now moving towards paper making

industry.

Company is focused on reducing cost to maintain and

enhance its local as well as its global position.

94

THREATS:

Water crisis is gone up in the country which may

result in the serious problem of low growth in

cotton, yarn and sugar cane.

A free trade pol icy of WTO is a major threat to the

company.

Maintaining its leadership in future after

implementation of free trade zones.

Threat of entry of new competitors.

A trade free policy can be the threat of the company as new

entry is easy.

Threat of water and gas crisis in it high consumption

potential market.

Now a days electricity shortage is the big threat

that can be resulted in the low production.

Due to political instability the bad condition of stock exchange

is a threat of company that results in low share prices.

Due to high trade tariff export and cotton and yarn can be low..

95

Suggestions and Recommendations.

Jobs should be assigned according to their caliber to develop

their interest in work, output and to enhance the efficiency of

workers. It is also observed that in some cases more than one

department maintains the same record. This is done all of over

staffing and unbalanced distribution of work, which results in

de-motivation of the employee and decrease in efficiency.

In colony mills there is lot of documentation and lengthy

procedure of paper work involved, which results in wastage of

time and deficiency so each system should be computerized

through intranet work.

Company must take init iative steps to maintain the

huge orders.

Workers must be trained to fol low the safety rules.

Management should take necessary action to implement the

safety rules in the organization.

Job variety must be added to change the

atmosphere, to develop the interest to employees

and to increase their performance. . So proper analysis

should be done and explore those employees who can do

better work in the organization.

People working in one section or department from years are

still with the same knowledge and style of doing job. There

should be proper career planning of employee that not only

96

sharpens the skills of the employee & improve its efficiency but

also results in better and improved output for the organization.

Proper advertisement must be planned to increase the sales, to

stay in touch with customers.

There should be delegation of authority up to certain extent

that enables manager to take timely decisions at the spot with

confidence. Involvement of top management and reaching at

the final decisions is time consuming and some times result in

heavy losses.

Colony mil ls must adopt the new technology.

Promotion campaigns and sales promotions must be

for sugar mil ls also.

97

CONCLUSION

We financially analyzed the four years annual reports of Colony

Textile limited, by making following analysis

Short term liquidity analysis

Long term liquidity analysis

Profitability analysis

Investor’s analysis

Du Pont analysis

Bankruptcy models

By analyzed its short term liquidity, we concluded

that the short term liquidity position of this company is going

down with the passage of time. Besides this, company short

term ratios are less as compare to benchmark ratios. So as a

short term creditor, we cannot make the decision to give short

term loan to colony textile mills limited.

Company’s long term debt paying ability is also going

down .It means that company has no ability to pay its long term

debts. So as a long term creditor, we cannot make the decision

to give long term loan to colony textile mills limited.

Profitability ratios are improving day by day.

Although this increase is not so much high, but increase in

profitability ratios tells us that company is earning good profits

98

and utilizing its assets in an excellent way. So as an investor ,we

can take decision to invest in colony textile mills limited.

After that we make the investor’s analysis in

investor’s analysis degree of financial leverage is improving. It

means that risk in the business is increasing. But when risk is

increasing return will also go to increase. Because where there is

risk, there is return.

After that we observed that the earning per share of colony textile

mills limited is going to improve day by day, and that is a positive

sign. So we conclude that as an investor, we make investment in

colony textile mills limited.

99

COLONY MILLS LIMITED SUMMARIZED INCOME STATEMENT

VERTICAL ANALYSISAS ON

2005 2006 2007 2008Rs.

(000)Rs.

(000)Rs.

(000)Rs.

(000)

Sales 100% 100% 100% 100%Cost of Good Sold

Raw Material 63.45 68.80 66.82 67.67Salary Wages 7.22 7.11 5.67 4.96FOH 18.21 16.05 13.63 13.96Total Manufacurring Cost 88.87 91.96 86.12 86.60Less Excees Closing Cost W.I.P -0.04 1.79 0.16 0.03

Cost of Goods Manufactured

88.83 90.18 85.96 86.63

Others -0.12 -3.78 1.28 -0.80

Cost of Goods Sold

88.95 86.39 87.24 85.84

Gross Profit 11.05 13.61 12.76 14.16

Less Operating Expenses

Distrubtion Cost

Product Transport

0.10 0.17 0.11 0.15

Salary & Wages 0.04 0.05 0.05 0.05Export Sales Expenses 1.56 1.40 2.05 3.01Others 0.19 0.54 0.14 0.33Total Distrubtion Cost 1.88 2.16 2.35 3.54

Administrative Expences

Salaries & Benefits

0.58 0.59 0.63 0.40

Repair & Maintances 0.08 0.14 0.09 0.11Others 0.27 0.37 0.52 0.50

101

Total Adminstrative Expenses

100.00 100.00 100.00 100.00

Others Operating Expenses

0.34 0.00 0.00 0.00

Operating Profit (EBIT) 7.90 10.35 9.17 9.61

Less Finance CostIntrest on Long Term Loan 1.78 0.13 3.07 1.67Intrest on Short Term Loan

1.50 4.19 1.87 5.16

Bank Charges & Other Finance Cost

0.08 0.37 0.36 1.65

Other Expenses 0.49 4.01 1.14 -1.48

Other Income 1.36 4.15 5.18 2.57EBT 5.40 5.80 7.92 5.18Tax 2.21 0.70 0.96 1.17

Net Profit 3.19 5.10 6.96 4.01

102

COLONY MILLS LIMITED SUMMARIZED INCOME STATEMENT

HORIZONTAL ANALYSISAS ON

2005 2006 2007 2008RS.

(000)RS.(000) RS.(000) RS.(000)

Sales100.0

061.3804

43172.702

39209.611

14Cost of Good Sold

Raw Material 100.00 66.56 181.89 223.58Salary Wages 100.00 60.48 135.61 144.15FOH 100.00 54.12 129.33 160.76Total Manufacurring Cost

100.00 63.52 167.36 204.26

Less Excees Closing Cost W.I.P

100.00 (3028.98)

(783.78) (197.09)

Cost of Goods Manufactured

100.00 62.31 167.11 204.42

Others100.00 1987.02 (1895.03

)1425.79

Cost of Goods Sold

100.00 59.62 169.38 202.28

Gross Profit 100.00 75.59 199.43 268.61

Less Operating Expenses

Distrubtion Cost

Product Transport

100.00 108.58 185.31 320.21

Salary & Wages 100.00 75.61 216.80 287.07Export Sales Expenses

100.00 55.37 228.11 405.39

Others100.0

0174.18 125.61 365.42

103

Total Distrubtion Cost

100.00 70.48 215.37 394.42

Administrative Expences

Salaries & Benefits

100.00 62.47 187.79 143.82

Repair & Maintances

100.00 107.43 187.57 295.37

Others 100.00 85.02 337.37 389.00Total Adminstrative Expenses

100.00 72.95 231.16 228.20

Others Operating Expenses

100.00 0.00 0.00 0.00

Operating Profit (EBIT)

100.00 80.37 200.51 254.95

Less Finance Cost

Intrest on Long Term Loan 100.00 4.32 297.04 196.08Intrest on Short Term Loan

100.00 171.02 214.65 719.36

Bank Charges & Other Finance Cost

100.00 275.11 742.82 4182.24

Other Expenses 100.00 502.18 400.85 (631.54)

Other Income 100.00 187.34 657.77 395.91EBT 100.00 65.95 253.26 200.83Tax 100.00 19.44 75.00 110.45Net Profit

100.00 98.24 377.04 263.59

104

COLONY MILLS LIMITED SUMMARIZED BALANCE SHEET

VERTICAL ANALYSISAS ON

2005 2006 2007 2008Rs.

(000)Rs.

(000)Rs.

(000)Rs.(00


Cash & Bank Balance

1.23 0.06 0.05 0.25

Short Term Investment

2.76 10.43 4.75 3.68

Trade Debts

3.62 2.13 3.34 2.62

Loans & Advances

2.39 0.00 0.00 0.00

Short Term Deposits

9.01 0.00 0.00 0.00

Other Receivable 0.23 2.24 5.53 6.28Stores & Spares 0.56 0.83 0.80 0.96Tax Refunds due from Government

0.22 0.54 0.92 0.97

Stock in Trade 0.00 0.00 0.00 0.00Raw Material 11.48 11.16 11.97 12.70Working in Process

1.34 1.03 0.98 0.69

Finish Goods 5.81 3.65 2.30 2.10Assets held for disposal 0.00 4.09 5.31 0.00Real etate property held for trading

0.00 0.00 0.00 3.88

Total Current Assets

38.63 36.16 35.95 34.13

0.00 0.00 0.00 0.00FIXED ASSETS 0.00 0.00 0.00 0.00

Work in Progress 7.81 3.61 2.93 10.15Plant & Machinery

53.18 32.93 43.23 37.20

Less: Depreciation

8.87 6.06 8.50 7.33

44.31 26.87 34.73 29.87Other 8.87 33.10 26.13 19.48

Total Fix Assets 61.00 63.58 63.80 59.500.00 0.00 0.00 0.00

105

Long Term Security Deposit

0.31 0.03 0.20 6.22

Long Term Investment

0.06 0.23 0.05 0.15

0.00 0.00 0.00 0.000.00 0.00 0.00 0.00

Total Assets100.00 100.00 100.00 100.0

0


CURRENT LIABILITIES

Trade & Other Payables

Creditor

1.05 2.61 6.11 15.54

Bills Payable 13.56 1.99 6.64 0.00Advance Payments

0.14 0.36 0.02 0.15

Other 1.64 1.09 1.05 0.89Total Trade & other Payables

16.38 6.06 13.82 16.58

Accured Interest & Mark Up 1.29 1.14 1.05 1.32Short Term Borrowing

15.03 23.96 17.44 17.90

Tax 1.22 0.62 0.32 0.28Current Portion of Non Current Liabilities

3.92 3.75 2.88 4.27

Provision against contingent liabilities

0.00 0.40 0.00 0.00

Total Current Liabilities

37.84 35.92 35.51 40.36

0.00 0.00 0.00 0.00NON CURRENT LIABILITIES

0.00 0.00 0.00 0.00

Loan from related parities

0.85 0.00 0.00 0.00

Liabilities against asset

0.23 0.57 0.81 1.05

Long term financing

20.48 25.35 26.46 33.04

other 17.15 4.36 2.72 2.5838.71 30.28 29.99 36.66

STOCK HOLDER EQUITY

Issued Capital 4.70 31.34 26.75 19.30Capital Reserve 2.96 2.46 7.75 3.67unapproriated profit

6.36 0.00 0.00 0.00

0.00 0.00 0.00 0.00

106

0.00 0.00 0.00 0.00Total Equity 14.03 33.80 34.50 22.97Surplus on Fix Asset

9.43 0.00 0.00 0.00

0.00 0.00 0.00 0.00Total Liabilities & Equity

100.00 100.00 100.00 100.00

107

COLONY MILLS LIMITED SUMMARIZED BALANCE SHEET

HORIZONTAL ANALYSISAS ON

2005 2006 2007 2008Rs.

(000)Rs.

(000)Rs.

(000)Rs.

(000


Cash & Bank Balance 100.00 6.76 6.75 49.07Short Term Investment 100.00 553.71 295.62 317.71Trade Debts 100.00 86.12 158.20 172.12Loans & Advances

100.00 0.00 0.00 0.00

Short Term Deposits

100.00 0.00 0.00 0.00

Other Receivable100.00 1445.1

14174.9

06571.1

0Stores & Spares 100.00 218.69 247.95 407.76

Tax Refunds due from Government100.00 364.54 724.87 1056.4

8Stock in Trade

Raw Material 100.00 142.36 178.91 263.15Working in Process

100.00 112.33 125.61 122.27

Finish Goods 100.00 92.03 68.02 86.09Assets held for disposalReal etate property held for tradingTotal Current Assets

100.00 137.03 159.65 210.09

FIXED ASSETSWork in Progress 100.00 67.72 64.32 308.84Plant & Machinery

100.00 90.65 139.48 166.29

Less: Depreciation

100.00 100.00 164.41 196.39

100.00 88.78 134.49 160.27Other 100.00 546.29 505.52 522.07

Total Fix Assets 100.00 152.61 179.45 231.91

Long Term Security Deposit

100.00 14.67 111.13 4709.48

Long Term Investment 100.00 578.05 144.46 592.90

108

Total Assets 100.00 146.41 171.56 237.76


CURRENT LIABILITIES

Trade & Other PayablesCreditor

100.00 365.50 1000.76

3526.72

Bills Payable 100.00 21.53 84.05 0.00Advance Payments

100.00 361.80 28.69 252.77

Other 100.00 97.85 109.91 129.84Total Trade & other Payables

100.00 54.16 144.75 240.66

Accured Interest & Mark Up 100.00 128.56 139.66 243.48Short Term Borrowing 100.00 233.44 199.14 283.26Tax 100.00 74.54 44.76 55.42Current Portion of Non Current Liabilities

100.00 140.06 125.97 259.07

Provision against contingent liabilitiesTotal Current Liabilities 100.00 139.00 161.01 253.62

NON CURRENT LIABILITIES

Loan from related parities 100.00 0.00 0.00 0.00

Liabilities against asset100.00 363.82 612.88 1095.6

8Long term financing

100.00 181.23 221.73 383.59

other 100.00 37.26 27.18 35.79100.00 114.52 132.94 225.21

STOCK HOLDER EQUITYIssued Capital 100.00 976.71 976.71 976.71Capital Reserve 100.00 121.30 448.40 294.53unapproriated profit

100.00 0.00 0.00 0.00

Total Equity 100.00 352.79 421.92 389.40Surplus on Fix Asset 100.00 0.00 0.00 0.00

Total Liabilities & Equity

100.00 146.41 171.56 237.76

109

PROFITABILITY RATIOS.

Years2005 2006 2007 2008

.G.P.M 11.050838 13.60858112.7608419

414.1612738

3

Years2005 2006 2007 2008

O.I.M7.90192635

910.3469501

29.17429812

79.61117684

4

Years2005 2006 2007 2008

Net profit margin

3.188396033

5.103263059

6.960817364

4.009523858

Years2005 2006 2007 2008

T.A.T.R 62.9471163726.3898346

263.3644584

655.4944750

1

Years2005 2006 2007 2008

ROA2.00700336

11.34674268

24.41071472

82.22506421

5

Years2005 2006 2007 2008

R.O.A8.15468782

26.98308677

611.5775722

211.4232387

2

110

Years2005 2006 2007 2008

Operating Assets

Turnover

103.1987322

67.4893248 126.195727 11.8852923

Years2005 2006 2007 2008

Sales to fixed assets

ratio103.20 67.49 126.20 118.85

Years2005 2006 2007 2008

Return on Investment

3.805863 0.4428402 6.839487 3.730959

111

SHORT TERM DEBT PAYING ABILITY.

2005 2006 2007 2008


228166693

14328162259

743184774

48


427986327

92324178169

151063040

58

CURRENT RATIO1.0209441

391.0064447

61.01228981

80.8457149

QUICK ASSETS 106441674

415826941

78188917143

623581846

77


427986327

92324178169

151063040

58

QUICK RATIO0.5286719

680.5655240

60.58275714

30.4618183


228166693

14328162259

743184774

48


427986327

92324178169

151063040

58

WORKING CAPITAL42168478 18036522 39840906

-78782661

0

CASH 65352792 4419673 4414338 32066725

MRK SECURITIES146685782 81220981

31336742 46603014

5


427986327

92324178169

151063040

58

CASH RATIO0.1053148

130.2917958

70.00177404

90.0975454

8

ANNUAL CREDIT SALES334940675

220558806

94578505405 70207295

42

AVG A/R150073976 23985087

5575118430 97937175

8


528.5714954

91.00588917

87.1686052

7


528.571495

491.00588918 7.168605

27

AVG COLLECTION PERIOD16.130209

1341.99967

21357.892307

850.21897

38

112

CGS297926922

017761045

03504635381

360265048

07

AVG INVENTORY990382399 11125526

57131321314

916763719

66


961.5964228

73.84275303

43.5949687

4


61.596422

873.84275303 3.594968

7

AVG OF INVENTORY119.672858

4225.5041

6193.6828355

1100.1399

54

SALES 334940675

220558806

94578450540

570207295

42

WORKING CAPITAL42168478 18036522 39840906

-78782661

0

SALES TO WORKING CAPITAL79.429159

19113.98432 145.190107 -

8.9115161

A/R Turnover in days 16.130209

1341.99967

21357.892307

850.21897

38

Inventory Turnover in days119.67285

84225.5041

6193.6828355

1100.1399

54

OPERATING CYCLE135.80306

75267.5038

33451.575143

3150.3589

28

113

LONG TERM DEBT PAYING ABILITY. Total liabilities

4073012548

5157325721

5979881246

9744871916

Total assets

5320958210

7790426593

9128943173

1.2651E+10

Debt ratio0.765465

9910.662008

1270.655046

3870.770271

16

Total liabilities

4073012548

5157325721

5979881246

9744871916

Shareholder's equity

746361256263310087

2314906192

729063506

50Debt to Equity ratio

5.457159673

1.958651025

1.898940505

3.35295809

Total liabilities

4073012548

5157325721

5979881246

9744871916


746361256263310087

2314906192

729063506

50Intangible assets

0 0 0 0

DEBT TO TENGIBLE NET WORTH RATIO

5.457159673

1.958651025

1.898940505

3.35295809

Current liabilities

2013378444

2798632792

3241781691

5106304058


746361256263310087

2314906192

729063506

50Current debt to net worth ratio

2.697592389

1.062865772

1.029443614

1.756947

LTD205963410

4235869292

9273809955

546385678

58

Equity746361256

2633100872

3149061927

2906350650

114

Total capitalization ratio

0.73401194

0.47251409

0.46509673

0.61479363

Fixed assets324558905

0495319444

1582421845

675269258

20Shareholder's equity

746361256263310087

2314906192

729063506

50Fixed asset to equity ratio

4.348549746

1.881125973

1.849509026

2.58982027

EBIT264667655

5212720950 530687771

674774732

Interest129235123 178660925 371807572

491568948

Time interest earned ratio

20.47954529

1.190640595

1.427318352

1.37269601

EBIT264667655

5212720950 530687771

674774732

Lease Pmt23443822 18219485 34889562

36416568

Tax rate 40% 40% 40% 40%Principle 0 0 0 0

intrest129235123 178660925 371807572

491568948

Preferred dividened

0 0 0 0

Fixed charge coverage ratio

10.49307897

0.703799129

0.834395848

0.8081941

115

Investor’s Analysis

2005 2006 2007 2008Financial leverage= EBIT/EBT

EBIT 310183157 291991853 830067779 854941799

EBT 180948234 119330928 458269207 363372851

Financial leverage

1.714209363

2.446908424

1.811310396

2.35279492

EPS=net income-Preferred dividened/No.of C/S Outstanding

Net income 106792352 104917000 513886773 28149782

6Preferred dividened 0 0 0 0

weighted average

C/S outstanding 10410959 135653589 244176300 24500000

0

EPS10.257686

350.7734185

342.1045726

921.1489707

2

Note There is no dilutive effect on the basic EPS of a company.

Price earning ratio=

Market price per share/EPS

Market price per share 12 13 12 14

EPS 10.25786 0.7734185 2.1045727 1.1489707

P/E ratio1.1698346

4416.808493

725.7018700

28 12.184819

% of earning retained=Net income-all divideneds/net income

Net income 106792352 104917000 513886773 281497826

All divideneds 106792352 104917000 513886773 281497826

% earning retained 0 0 0 0

Dividened payout ratio= Dividened per share/EPS


Earning per share 10.26 0.77 2.1045727 1.1489707

Dividened payout ratio 1 1 1 1

Dividened Yield=Dividened per share/ Market price of share


Market price of share 12 13 12 14

Dividened yield 0.855 0.0592307

690.1753810

580.0820693

4

Book value=Total shareholder's equity-

116

Preferred equity

Total NO.of common stock outstanding

Total shareholder's equity 746361256 263310087

2314906192

729063506

50Preferred equity 0 0 0 0

common stock outstanding 10410959 135653589 244176300 24500000

071.689962

0919.410477

0212.896673

1311.862655

7

117

colony mills

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