final report of financial statement analysis of packages limited lahore

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Packages Limited Lahore

Financial Statement Analysis

ACKNOWLEDGEMENT

In the name of “Allah”, the most beneficent and merciful who gave

us strength and knowledge to complete this report. This report is a

part of our course “Financial Statement Analysis”. This has proved

to be a great experience. We would like to express our gratitude to

our teacher Mr. Muhammad Ali Wallana who gave us this

opportunity to fulfill this report. We would also like to thank our

fellows who participated in a focus group session. They gave us

many helpful comments which helped us a lot in preparing our

report.

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DEDICATION

We would like to dedicate this project to our BELOVED

parents who have always encouraged us throughout in our

academic career and make possible for us to stand where

we are today and our Honorable teacher Mr. Muhammad

Ali Wallana who make us able to do such task.

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PREFACEAs the world is growing rapidly, the businesses are also moving to

become the huge one. And by that result, more and more people

want to become a master in these businesses. The main purpose in

the finance field is to know how the financial analysis is done. We

all know that finance is the blood of any business and without it no

business can run. Financial analysis of a company is very difficult

and the most important task and by doing this we are able to know

the whole financial position and financial structure of the company.

Simply by looking at how much cash a company has does not

provide enough information. The financial statements need to be

analyzed to measure a company’s performance and to compare it

with other firm’s in the same industry. The resulting information is

intended to be useful to owners, potential investors, creditors,

analysts, and others as the analysis evaluates the past performance,

future potential and financial position of the firm.

This report is an analysis of financial statements of Packages

Limited Lahore. This report has been prepared with an objective to

develop analytical skills required to interpret the information

(explicit as well as implicit) provided by the financial statements

and to measure the company’s performance during the past few

years i.e. 2004 to 2008. The financial statements are analyzed using

traditional evaluation techniques such as horizontal analysis, vertical

analysis and trend analysis. Ratios are an important tool in analyzing

the financial statements & the company’s profitability, solvency &

liquidity. Sincere attempts have been made to make this report error

free but if any errors and omissions are found then we apologize for

that.

Rabia Chaudhary

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TABLE OF CONTANTS

Sr. No. Description Page No.

1 Executive Summary 6

2 Introduction to the Company 9

3 Financial Ratio Analysis 57

4 Activity Analysis of Company 58

5 Liquidity Analysis of Company 67

6 Profitability Analysis of Company 75

7 Investors Analysis of Company 88

8 Long Term Analysis of Company 96

9 Conclusion 104

10 Recommendation 106

11 Bibliography 108


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TABLE OF ANNEXURE

Sr. No. Description Page No.

I Summarized Balance Sheet 110

II Summarized Income Statement 112

III Horizontal Analysis of Income Statement 113

IV Vertical Analysis of Income Statement 114

V Horizontal Analysis of Balance Sheet 115

VI Vertical Analysis of Balance Sheet 117

VII Activity Analysis of Company 119

VIII Liquidity Analysis of Company 123

IX Profitability Analysis of Company 126

X Investors Analysis of Company 132

XI Long Term Analysis of Company 135


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EXECUTIVE SUMMARYSR NO. DESCRIPTION DATA

1 The Company Packages Limited Lahore

2 Condensed Income Statement 2008 2007 2006 2005 2004

A. Net sales 12,224,779 9,028,635 7,846,599 7,098,765 5,986,977 B. Gross profit 943,299 1,199,273 1,294,604 1,352,979 1,308,602 C. Operating profit 405,650 733,037 918,252 995,782 873,409 D. Profit before tax (307,889) 4,632,948 6,347,840 1,329,925 1,186,621 Net profit (195,825) 4,325,948 6,100,780 1,015,364 957,5023 Condensed Balance Sheet 2008 2007 2006 2005 2004 A. Total current assets 6,923,461 4,837,402 3,414,222 4,558,737 2,424,817 B. Total non-current assets 282,861 10,413,050 6,028,620 775,367 755,126 C. Total fixed assets 27,828,311 18,187,991 13,230,634 6,286,300 3,294,543 Total assets 35,034,633 33,438,443 22,673,476 11,620,404 6,474,486

A. Total short-term

liabilities 840,788 955,790 688,455 547,468 527,390

B. Total non-current

liabilities 840,788 955,790 688,455 547,468 527,390

C. Total long-term

liabilities 12,304,400 12,346,500 6,000,000 1,000,851 6,351

D. Total owner's equity 16,272,572 18,170,772 13,672,797 7,736,255 4,191,860

Total liabilities and

owner's Equity 35,034,633 33,438,443 22,673,476 11,620,404 6,474,486

4 Activity Ratio 2008 2007 2006 2005 2004 A/R Turnover(times) 8.69 8.56 9.77 9.96 9.35 Aging Of A/R(Days) 41.98 42.65 37.35 36.64 39.05 Inventory Turnover(Times) 3.04 3.10 3.56 3.80 3.17

Days Sale in

Inventory(Days) 120 118 103 96 115


Amount in Thousands

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Working Capital

Turnover(Times) 9.36 3.14 7.12 3.19 8.86

Current Asste

Turnover(Times) 1.72 1.78 2.10 1.41 2.20

Fixed Assets Turnover(Times) 0.53 0.57 0.80 1.48 1.82

Total Asset

Turnover(Times) 0.36 0.32 0.46 0.78 0.92

5 Liquidity Ratio 2008 2007 2006 2005 2004Current Ratio 1.23 :1 2.46 :1 1.48 :1 1.95 :1 1.39 :1Quick Ratio 0.43 :1 1.66 :1 1.60 :1 2.94 :1 1.64 :1Cash Ratio 0.04 :1 0.05 :1 0.05 :1 0.86 :1 0.08 :1Cash Flow From Operations

Ratio 0.23 :1 0.64 :1 0.55 :1 0.59 :1 0.73 :1

Operating Cycle(days) 162 160 140 133 154Working Capital Ratio 1,306,588 2,872,021 1,101,998 2,222,907 675,932

6 Profitability Ratios 2008 2007 2006 2005 2004 Gross Profit Margin(%age) 7.72% 13.28% 16.50% 19.06% 21.86%

Operating Profit

Margin(%age) 3.32% 8.12% 11.70% 14.03% 14.59%

Profit Befor Tax Margin(%age) (2.52) 51.31% 80.90% 18.73% 19.82%

Net Profit Margin(%age) (1.60) 47.91% 77.75% 14.30% 15.99%

Return On Assets(%age) - 15.42% 35.58% 11.22% 14.79%

Return On Equity(%age) -1.14% 27.17% 56.99% 17.02% 22.84%Return On Common

Equity(%age) - 27.17% 56.99% 17.02% 22.84%

Return On

Investment(%age) 2.99% 18.19% 43.31% 17.56% 24.96%

Operating Asset

Turnover(%age) 18.70 0.96 1.76 4.54 8.86


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Return On Operating Asset 62.04% 7.81% 20.65% 63.69% 129.22%

Dupont Return on Operating

Asset(%age) 62.04% 7.81% 20.65% 63.69% 129.22%

Dupont Return on Total

Asset(%age) -0.57% 15.42% 35.58% 11.22% 14.79%

7 Investor Ratio 2008 2007 2006 2005 2004

Degree of Financial Leverage - 0.16 0.14 0.75 0.74

Earning Per Share - 58.96 87.30 14.53 20.14

Price Earning Ratio - 7.10 2.34 12.44 10.15

Book Value Per Share 192.85 247.65 195.66 110.71 88.18

Dividend Payout Ratio - 11.12% 6.85% 35.47% 43.25%

Dividend Yield - 1.57% 2.93% 2.85% 4.26%

Percentage of Retained

Earning - 90.33% 93.15% 60.36% 57.91%

8 Long term Analysis 2008 2007 2006 2005 2004

Time Interest Earned

Ratio(times) 0.24 2.00 11.64 5.37 6.28

Debt Service Coverage

Ratio(Times) 0.18 2.00 11.64 5.37 6.28

Fixed Charge Coverage

Ratio(Times) 0.18 2.00 11.64 5.37 6.28

Debt Ratio(% age) 53.55% 45.66% 39.70% 33.43% 35.26% Debt Equity ratio 43.06% 40.46% 30.50% 11.46% 0.15%

Fixed Assets Coverage

Ratio(Times) 2.26 1.47 2.21 6.28 518.74

9 Composite Ratio


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COMPANY PROFILE

Packaging Limited was born out of a dream to set up in Pakistan industries of

excellence based on local raw material and talent. Packages Limited is a

leading packaging manufacturing company of Pakistan. It is the sole largest

industry in Pakistan. Syed Baber Ali Shah, who was the first managing director

of Packages Limited, went to Sweden in 1954 to negotiate the contract with AB

Akerland & Rausing of Sweden. AB Akerland and Rausing had been the

leading paper converters in Europe. Pakistanis needed technical collaboration

with their Swedish partners. In the beginning, the first problem was the

selection of the site. Finally, Lahore was selected due to the following reasons:

Easy availability of workers.

Easy availability of raw material.

Easy transportation all over the country.

A B Akerlund & Rausing packaging company brought machinery and expert

technicians while the Ali Family provided the necessary capital, land, labor,

local expertise and management. Syed Baber Ali was the first Managing

Director.

Established in 1956 as a joint venture between the Ali Group of Pakistan and

Akerlund and Rausing of Sweden, Packages Limited provides premium

packaging solutions for exceptional value to individuals and businesses. It is

the only packaging facility in Pakistan offering a complete range of packaging

solutions including offset printed cartons, shipping containers and flexible


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packaging materials to individuals and businesses world-wide. Its clientele

includes illustrious names such as Unilever and Pakistan Tobacco Company,

who have been its customers for over 50 years. It employs over 3000 people

and had sales of over US $ 136 million in 2005.

Listed on all three stock exchanges in Pakistan, Packages Limited has

maintained a long-time credit rating of AA. Its joint ventures and business

alliances with some of the world's biggest names reflect its forward-looking

strategy of continuously improving customer value through improvements in

productivity.

Packages have always been at the forefront of new developments in packaging

research and have pioneered several innovations, including the use of wheat

straw as a raw material for paper and board manufacture. Its on-site paper and

board mill, established in 1968, has constantly increased its production

capacity. A new plant with even greater capabilities is planned for the near

future.

OVER THE YEARS

Over the years, Packages has continued to enhance its facilities to meet the growing

demand of packaging products.

Packages Limited started operating in May 1957 with a paid up capital of Rs. 4.94

million as a joint venture between the Ali group and Akerland & Rausing of Sweden.

Initially, Packages produced cartons for the cigarette, tea, confectionery, soap,

pharmaceutical products and other consumer products. These cartons were produced

from paper and board supplied from mills in Chittacong, Khulna, Charsadda and


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Peshawar. However the quality and quantity of paper and board supplied was

insufficient. Over the years, the company continued to enhance its facilities to meet

the growing demand of packaging products. Additional capital was raised from

sponsors, International Finance Corporation and from the public in making the total

paid up capital to Rs. 31 million in 1965.

As a first step, Packages commissioned its own paper mill in 1968 having production

capacity of 24,000 tons of paper & paper board based on waste paper, agricultural

waste, wheat straw and kahi grass.

Since 1982, Packages Limited has had a joint venture with Tetra Pak International in

Tetra Pak Pakistan Limited to manufacture paperboard for liquid food packaging and

to market Tetra Pak packaging equipment.

Packages commissioned its own paper mill with a production capacity of 24,000

tonnes in 1968. The mill produces paper and paperboard based on waste paper and

agricultural by-products like wheat straw and river grass. With growing demand the

capacity was increased periodically and in 2003 was nearly 100,000 tonnes per year.

In 1993, a joint venture agreement was signed with Mitsubishi Corporation of Japan

for the manufacture of Polypropylene films at the Industrial Estate in Hattar, NWFP.

This project, called Tri-Pack Films Limited, commenced production in 1995 with

equity participation by Packages Limited, Mitsubishi Corporation, Altawfeek

Company for Investment Funds, Saudi Arabia and the public. Packages Limited owns

33% of Tri-Pack Films Limited's equity.

In 1994, Coates Lorilleux Pakistan Limited, in which Packages Limited has 55%

ownership, commenced production and sale of printing inks.

In 1996, a joint venture agreement was signed with Printcare (Ceylon) Limited for the

production of flexible packaging materials in Sri Lanka. Packages Lanka (Private)

Limited commenced production in 1998. Packages Limited now owns 79% of this

company.

In 1999-2000, Packages Limited successfully completed the expansion of the flexible

packaging line by installing a new rotogravure printing machine and expanded the

carton line by adding a new Lemanic rotogravure inline printing and cutting creasing

machine. A new 8-color Flexographic printing machine was also installed in the

Flexible Business Unit in 2001.

Packages Limited has also started producing corrugated boxes from its plant in

Karachi from 2002.


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In 2003, Packages entered into an agreement with Vimpex of Austria to provide

management and technical assistance to help in the operation, production optimization

and capacity expansion of a paperboard mill in Syria. A team from Packages is

currently providing these services and is close to optimizing mill production. At the

moment Packages Limited had 5 Paper Machines; four for paper & board and one for

tissue.

The Bulleh Shah Project: Packages is planning to relocate its paper manufacturing

facilities from the existing location, which has limited capacity for expansion, to a

new site 54 km from the present one. This will enable us to radically increase our

paper and paperboard production from 100,000 to 300,000 tonnes per year. The

packaging operation shall continue concurrently at the Lahore site.

MISSION STATEMENT

TO BE

A market leader by providing quality products and superior service to our

customers, while learning from their feedback to set even higher standards for

our products.

A company that continuously enhances its superior technological competence

to provide innovative solutions to cater to customer needs.

A company that attracts and retains outstanding people by creating a culture

that fosters openness and innovation, promotes individual growth, and rewards

initiative and performance.

A company which combines its people, technology, management systems, and

market opportunities to achieve profitable growth while providing fair returns

to its shareholders.


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A company that endeavors to set the highest standards in corporate ethics in

serving the society.

Company CORE VALUES

Underlying everything Packages does and everything it believes in is a set of core

values. These guide it to deal with every aspect of any issue it might encounter in its

personal and professional lives. These values help Packages grow inside and outside,

personally and as an organization.

Smart Governance

Packages is committed to running its business successfully and efficiently, providing

long term benefits to its employees and shareholders, and enriching the lives of those

whom it serves by fulfilling our corporate responsibility to the best of our ability. It

expects excellence from all processes, whether they relate to policy formation and

accounting procedures or product development and customer service.

Work Environment

The policies and core values are aimed towards creating an informal yet stimulating

team-oriented work environment with a culture of sharing and open communication.

It cherishes the diversity of viewpoint of every individual.

All employees have the right to a stress- and injury-free work environment. Packages

ensure employee safety and health by providing various in-house facilities such as a

gym and making sure that all staff understand and uphold our safety policy. All its

employees are permitted and encouraged to afford time and attention to personal

concerns.


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Our People

The success of any organization is largely dependent on the people working for it.

Each member of the team is considered equally important and provided constant

training, motivation and guidance. Packages has a dedicated staff of the highest

caliber dedicated to making our business a success.

It ensures that every employee has the opportunity for maximum professional

development. To achieve this goal, it seeks to provide challenging work prospects for

all employees. Each person is compensated and rewarded for his or her performance

and hard work on a strict merit basis.

Conservation

Packages expects and encourages its employees to actively participate in community

service and to take care of the environment entrusted to us as citizens sharing the

earth's resources.

Customer Satisfaction

Packages is customer-driven; it goes the extra mile to make sure our clients'

expectations are met and exceeded on every issue. It partners with leading companies

to arm itself with the latest technology and provide customers with innovative

solutions in the most cost-effective manner available.

Ethical behavior

Packages makes it clear that being a sincere, honest and decent human being takes

precedence over everything else. In the Packages family, there is an all-round respect

for elders, tolerance for equals and affection for youngsters. Managers are expected to

lead from the front, train junior colleagues through delegation, resolve conflicts

speedily, be visible at all times and act as role models for others.

It makes sure that all its processes and methods conform to the highest ideals of

professional behavior. The organizational structure is straight-forward and need-

based; accountability is transparent, consistent and both horizontal and vertical.


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CORPORATE STRUCTURE

Packages Limited has three main manufacturing divisions:

The Paper and Board Division, which manufactures paper and board from a

mixture of wood, pulp and other raw materials, and treats effluent

The Packaging Division, which takes materials from the Paper and Board

Division and converts customer ideas into finished products

The Consumer Products Division, which manufactures off-the-shelf branded

consumer products

Packages Lanka is a joint venture between Packages Limited and the Print Care

Group of Sri Lanka, and DIC Pakistan a joint venture between Packages Limited and

Dainippon Ink and Chemicals, Inc. of Japan.


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OUR PEOPLE

People are key for Packages Limited. It actively seeks and retains people who feel

there is no compromising on excellence, and a corporate culture in which its family

can grow and thrive. Heading a multi-talented team is its leadership of experienced

senior management. Together, they know how to combine all their skills and

knowledge to deliver state-of-the-art solutions to its customers.

BOARD OF DIRECTORS

Asadullah Khawaja (Chairman) Mujeeb Rashid

Kamal Afsar Shamim Ahmad Khan

Khalid Yacob Syed Hyder Ali (Managing Director)

Kirsten Rausing Syed Shahid Ali

Markku Juha Pentikainen Tariq Iqbal Khan

ADVISOR

Syed Babar Ali

COMPANY SECRETARY

Adi J. Cawasji

EXECUTIVE COMMITTEE

Syed Hyder Ali - Chairman Mujeeb Rashid - Member Khalid Yacob - Member

AUDIT COMMITTEE

Shamim Ahmad Khan - Chairman (Non-Executive Director)

Tariq Iqbal Khan - Member (Non-Executive Director)

Syed Shahid Ali - Member (Non-Executive Director)


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Mujeeb Rashid - Member (Director & General Manager) Adi J. Cawasji – Secretary

BUSINESS ALLIANCES

One of the best ways for a business to leverage its products and increase

growth is through association. Its business alliances help manage business

more effectively, as well as helping it and its partners develop and diversify our

interests. Customers also benefit from the increased knowledge base, as

Packages transform its market awareness and shared technology into

innovative and cost effective solutions for customers.

The Packages Group is proud of its long standing network of friends and

family, with key business partners as diverse as Print Care, Coca-Cola, Tetra

Pak and Mitsubishi Corporation.

Nestle Milkpak Ltd (NML)

Milkpak was established in 1981. It collects milk

from the rural areas, processes it by the UHT

method, and sells it in Tetra Pak containers. In

1988, Nestle of Switzerland bought into Milkpak

and expanded its scope and activities - Nestle now

owns 58% of the enlarged company. NML sales in

year 2004 were Rs. 12.8 billion with 1,560

employees.


http://www.nestle.com/

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Tetra Pak Pakistan Ltd

Tetra Pak Pakistan Limited is a joint venture

between Packages Limited and Tetra Pak

International, the world's leading liquid food

packaging company. It was established in 1982.

Tri-Pack Films Ltd

Tri-pack manufactures BOPP film with an annual

capacity of 11,000 tonnes. Tri-Pack sales in 2004

were Rs.2.05 billion. The number of employees of

the company is 220. Packages Limited has 33.3%

ownership while Mitsubishi Corporation of Japan

holds 25% shares in the company. The Company

has increased its capacity to 26,000 tonnes with a

new plant in Port Qasim, Karachi, which started

production in 2004.

DIC Ltd

A joint venture between Packages Limited (55%)

and Dainippon Ink and Chemicals Singapore Pte.

Limited (45%). DIC Limited has an annual

capacity of 3,075 tonnes of printing ink. Sales for

2004 were Rs. 640 million. Number of employees:

131. Dainippon Ink and Chemicals is one of the

largest printing ink manufacturing groups

worldwide.


http://www.tripack.com.pk/

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Packages Lanka PVT. Ltd

A joint venture between Packages Limited and

Print care (Ceylon) Limited of Sri Lanka. This

project was set up for the manufacture of flexible

packaging material. Packages Limited owns 79%

of this company. Packages Lanka Private Limited

has an annual capacity of producing 54 million

meters flexible packaging. Packages Lanka Private

Limited had sales of Pak Rs. 265 million in the

year 2004. The number of employees of the

company is 122.

International General Insurance Company of Pakistan Ltd. (IGI)

IGI, the insurance company of the Group, was

established in 1953. It had a gross premium of Rs.

423 million in the year 2004. Number of

employees: 81. Recently IGI has acquired the

insurance business of Pakistan branch of Royal &

Sun Alliance Insurance Plc.

First International Investment Bank Ltd. (Interbank)

Established in 1990, a joint venture between

American Express Bank, International Finance

Corporation, and the Packages Group with an

issued share capital of Rs. 404 million. In the year

2003-2004 the Bank had an after-tax profit of

Rs.42 million. The number of employees is 83.

Coca-Cola Beverages Pakistan Ltd.

Packages Group is a minor shareholder in Coca-

Cola Beverages Pakistan Limited (CCBPL) of

which The Coca-Cola Company; Atlanta, U.S.A.

holds 92% shares.


http://www.interbank.com.pk/

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QUALITY FOCUS

Manufacturing top quality products has always been top priority for Packages

Limited. To achieve this, it has implemented sound engineering policies which we are

constantly improving. Today, the idea of processes includes not only manufacturing

policies but also business and management processes. Supporting these processes are

stringent quality assurance procedures and a comprehensive system of internal audits.

HIGHLIGHTS

The organization complies with the ISO 9001 standard.

Packages was the 6th company in Pakistan to adopt the ISO series as its

quality standard.

It has 57 Quality Improvement Teams in various departments to ensure

continuous improvement focus in the organization.

Key performance indicators (KPI) concept: Each division in the company

sets SMART (specific, measurable, achievable, recordable and time-based)

targets for the annual improvement of its key process parameters, reviewed

by the management every quarter.

It has a comprehensive set of engineering tools, rules, processes, training

materials, guidelines, best practices and other supporting documents to

make sure our products comply with every possible customer requirement.

Details of ISO certification

In chronological order, Business Units were certified on the following dates:

The Flexible Packaging Division was the first division to be certified under

ISO 9001 in 1995.


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This was followed by the certification of the Carton Business Unit in 1997,

The Consumer Products Division in 1998

The Corruwal Business Unit in 1999, and

The Pulp, Paper and Board Mill in 1999.

By the year 2000, the whole organization had been certified under ISO 9001 and a

sequence of acquiring certification renewals had been successfully put into place.

Continuous Improvement

The first ISO 9001 certification in 1995 was also made the basis of the ultimate goal

of total quality management. In 2000, the concept of Quality Improvement Teams

(QIT) was introduced in various departments. There are 57 QITs today, working on

the Japanese principle of continuous incremental improvement called KAIZEN. Their

performance is also monitored quarterly and cash awards and certificates of

achievement given to the top performing team.

. . . And what does being ISO certified mean?

Enhanced product quality and reliability at a reasonable price.

Greater compatibility and interoperability of goods.

Simplification for improved usability.

Improved health, safety and environment protection.

Reduction of waste.

Increased distribution efficiency and maintenance.

QUALITY POLICY

We at Packages Limited are committed to producing quality products

which conform to our customer requirements and strengthen our position

as a quality-managed company. Our pledge is to provide the market with

the best quality products at competitive prices through a customer-driven

and service-oriented, dynamic management team. To meet this


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obligation, the company will continue updating skills of its employees by

training, acquisition of new technology, and regular re-evaluation of its

quality control and assurance systems. Appropriate resources of the

company will be directed towards achieving the quality goals through

employee participation.


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COMMUNITY INITIATIVES

We believe that the community in which we operate should benefit not only

from our economic success, but from the time and energy which we invest.

Packages, as a responsible corporate citizen, has always undertaken to make a

positive contribution to the community it works in through employee volunteer

efforts and corporate initiatives.

Our community efforts reflect our corporate culture by building strength and

value through mutual assistance and goodwill.

Rural Sector Improvement

Pakistan is rated amongst the world's top five milk producers, even though it

has no organized milk sector. Transport to the cities had traditionally been the

domain of the contractors, who were unable to maintain the quality of the milk

during transit. Consequently, when Packages' milk packaging plant needed a

reliable daily source of milk, they were forced to buy directly from the dairy

farmers when they were unable to reach an agreement with the contractors.

Today, the estimated daily intake of the aseptic dairy plants in the country

exceeds 3 million liters and has become a constant source of substantial income

to a large sector of the rural population. This, in itself, has been a major

contribution from Packages towards the uplift of the rural sector.


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Propagating Horticulture

Today, Packages is as well known for its roses as for its industrial activities.

The number of varieties of roses in our gardens exceeds 300 and includes

plants, bushes and creepers, as well as exotic specimens such as miniature,

green and even black roses. The company also holds an annual rose show for 2

to 3 days in spring for its patrons, customers, employees and their families.

The company has established a fair-sized nursery from which, till recently,

almost 500 rose cuttings per year were provided, free of cost, to institutions and

people interested in horticulture. Apart from growing its own roses, Packages

has also taken a keen interest in the activities of the Horticulture Society of

Pakistan and, for the last four decades, has been responsible for managing the

annual Chrysanthemum and Spring Flower Show in Lahore.

ENCOURAGING SPORT

To encourage young sportsmen all over the country, Packages has been

organizing the annual Jafar Memorial Interschool Hockey Tournament for the

last thirty six years in memory of Syed Muhammad Jafar, an ex-Olympian who

died in his youth. This popular tournament has proved very useful in the early

selection of promising hockey players of the future. 41 schools participated in

the 36th championship held in Lahore and an estimated 35 players of the

National Hockey Team have been identified through these competitive matches

over the years.

Worldwide TECHNICAL aid programs

The first involvement of Packages in a foreign assignment was in 1970, when a

contract for providing technical services to Kibo Paper Industries Ltd.,

Tanzania, was signed. The corrugated board manufacturing plant, set up in

1966, was operating at a low capacity and had accumulated substantial


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financial losses. The management was taken over by a team of four experts

from Packages, and company operations started generating profits within the

first year of this switchover.

The second opportunity followed soon after. In 1971, Packages extended

similar services to a company called P T Guru in Jakarta, which was set up as a

printing/packaging operation in 1970 and had run into serious financial and

production problems. Packages sent another team of experts to Indonesia in

1971, and succeeded in turning the company around in a very short time

period.

In the same year, the National Development Corporation of Tanzania requested

Packages to take over the operation of another of its companies called Printpak

Tanzania. The same success was achieved here, and a printing ink

manufacturing plant was installed. A team of experts also commissioned,

constructed and operated Tanzania's first paper mill. In 1979, a six million

dollar plant called Nasco Packages was set up in Jos, Nigeria for the

manufacture of offset cartons, flexible packaging and corrugated containers.

The plant went on to become one of the main packaging companies in Northern

Nigeria, and a great financial success.

Towards the end of 1979, Packages provided expertise in the installation and

management of a modern corrugated box manufacturing plant in Kuwait named

Carton Industries Company SAK. A packaging plant in Yemen, engaged in the

manufacture of polyethylene film was also technically supported for a short

while during 1983.

Just when its assistance to these countries was coming to an end, Packages

accepted the singular challenge of helping a floundering company in Russia.

Tetra Pak AB (Kuban) was a packaging complex of three factories with

facilities for manufacturing folding cartons, flexible packaging and corrugated

boxes. In a two-and-a-half years' association, assistance was provided in


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formulating a management information system, streamlining production

operations and training local staff.

Thus, in its history of about five decades, Packages has somewhat repaid the

debt of gratitude it owes to the developed world by helping needy and

disadvantaged companies in other developing countries.


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ENVIRONMENTAL POLICY

Packages is committed to the environment. It realizes that we live in a world

where resources are finite and the eco-system has a limited capacity to absorb

the load mankind is placing on it. That is why Packages makes every effort to

make sustainable development a reality. The numerous projects and plants

implemented in and around the site bear ample testimony to our dedication.

Some of the objectives are to increase recycling rates, improve effluent and

waste management, and reduce water loss. These and other environmental

concerns are exemplified in its environmental policy, which every employee is

expected to uphold and implement.

Environment, Health and Safety (EH&S) Policy

Packages Limited shall:

Minimize its environmental impact, as is economically and

practically possible.

Save raw materials including energy and water, avoid waste.

Ensure that all its present and future activities are conducted

safely, without endangering the health of its employees, its

customers and the public.

Develop plans and procedures and provide resources to

successfully implement this policy and for dealing effectively with

any emergency.


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Provide environmental, health and safety training to all employees

and other relevant persons to enable them to carry out their duties

safely without causing harm to themselves, to other individuals and

to environment.

Ensure that all its activities comply with national environmental,

health and safety regulations.

This policy shall be reviewed as and when required for betterment of the same.

Recycling Paper

Packages has the capability of producing 100% recycled paper. Various grades

of paper and board (shipping, cartons, newsprint, magazines, and imported

waste paper) are collected and then shredded. This is fed to a huge mixer where

a controlled percentage of virgin pulp and used paper are mixed together to

produce material for recycled paper.

Effluent and Waste Management

Discharged water from the paper and board mill goes to a septic tank where

heavy, unsolvable material settles down and is constantly scooped out.

Specialized cleaning equipment removes the remaining mud and suspended

particles. The suspended solids are separated and treated on mud de-watering

equipment and thickened for disposal.

The introduction of the new method of using wheat straw as a raw material was

a bold step partly aimed at reducing the chemical load of the waste matter. An

even bolder step was taken with the import of Chemical Recovery Plant in

1997. Black liquid, which poses severe difficulties in the waste matter

treatment system in any pulp mill, is concentrated in this plant to 58% solids

and then incinerated in a waste heat boiler, where organic impurities are

destroyed and the steam generated is utilized for evaporating the incoming

liquor. The ash, containing inorganic compounds, is dissolved in water to

recover any available chemicals.


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Water Management

This is a recent part of the green policy adopted by Packages. It includes

reduction of the usage of water in all stages of its processes. Better water

management has led to better utilization of water and other raw inputs.

At 300 tonnes per ton of pulp produced, the quantity of water itself poses

serious problems of extraction and disposal. To reduce it, a dissolved air

flocculation system and special filters have been added to different streams of

reusable water and wherever possible, fresh water in various processes has

gradually been replaced with this water.

Independent Energy House

Packages is self-sufficient in its power generation capabilities with an installed

capacity of 26MW. A local boiler meets the company's steam demands.

Results

These efforts were streamlined in 1997 through the formation of a committee

of internal experts to look regularly into issues concerning environment, health

and safety. The committee is currently involved in the management of fresh

water use, effluent management, and control on air emissions, energy

conservation and maintenance of health and safety standards in the company. It

uses guidelines provided by the National Environment Quality Standards

(NEQS) as a benchmark, even modifying processes to conform to its

objectives.

As a result of combined efforts, the quantity of water used, as well as its BOD

and COD has been reduced significantly. Steam consumption and heat energy

consumption in 2003 have both shown a reduction of over 16% each compared

to 1999. The electricity use in the same period has gone down by an impressive

25%.

These activities have acquired such importance for the company that out of

US$ 100 million spent on new processes and technology in the last few years,

20% were spent on environmental issues alone.


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31 of 136


Production Divisions of Packages Limited

Packaging Division PBD CPD


Packages Limited

C A R T O N L I N E

R E P R O D U C T I O N L I N E

F L E X I B L E L I N E C O R R U W A L L I N E

F A C I A L T I S S U E S

T O I L E T R O L L S

P A P E R C U P S

P A P E R P L A T E S

P A P E RB O A R D

F L E X I B L E P A C K A G I N G

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

C Y L I N D E R S

O F F S E T P L A T E S

P H O T O P O L Y M E R P L A T E S

Packaging Division PBD CPD

N A P K I N S

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Products of Packages LimitedPAPER & BOARD

Packages is producing high quality paper and board since 1965

using environment friendly manufacturing processes. It

specializes in making a variety of duplex boards and paper.

The products are tested for high performance in terms of

strength, stiffness and gloss.

CARTON BUSINESS UNIT

The carton business unit is an integral part of the

manufacturing facilities at Packages. Continuous

improvements in technology help its customers exert exact

control over each stage of the manufacturing process.

Customized packaging and consistent quality give all our

cartons superior shelf visibility.

CORRUWAL BUSINESS UNIT

Packages has been manufacturing corrugated cartons since

1974. Produced in a variety of sizes, these cartons are of

great value for in-country goods distribution and export.

Capacity increase and product development continue to be

a high priority.

FLEXIBLE BUSINESS UNIT

With improved barrier properties and lower cost compared

to rigid packaging, flexible packaging is steadily gaining

importance in the packaging industry. The flexible line

makes high quality packaging films and laminates, and

offers other specialized services such as rotogravure

printing and sleeve-making.

CONSUMER PRODUCTS


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A range of products for those annoying problems in life:

The consumer products feature innovative ideas for

making everyday living easier and more comfortable, both

indoors and out. The consumer product division has

consistently been gaining importance, and its projected

share of the overall business at Packages now stands at

over 11%.

PAPER & BOARD

Packages is producing high quality paper and board since 1965 using

environment friendly manufacturing processes. We specialize in making a

variety of duplex boards and paper. All products are tested for high

performance in terms of strength, stiffness and gloss. From coffee cups to the

books we read, from Tetra Pak juice containers to huge shipping containers,

paper and board products touch our lives in a thousand ways every day.

PAPER


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Packages produces:

High gloss writing paper.

Machine glazed / special poster paper.

Fluting paper.

Liner for shipping cartons.

Corrugating medium paper.

Wood-free writing/printing paper.

Paper quality and weight is determined by the

client's specific requirements and Packages ensures

this is carried out to the exact specifications

provided.

Paper is available in the following weights:

Type of Paper Weight (g/m2)Test liner 125-220Corrugated medium Paper/Fluting

120-170

Wrapping Paper 70-90High gloss writing paper 58-68Poster Paper 40-90


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BOARD

Packages manufactures several types of board.

Food Board, a basic raw material in liquid food

packaging, is being manufactured since 1979 for

Tetra Pak Pakistan Limited. This material is

used in making aseptic packaging for milk,

cream, oil, fruit juices and other perishable food

items.

Some of our board products are:

Liquid packaging board

Food grade board

Duplex board / chipboard

Bleached board

Tobacco board and cardboard

Liner board

Board is available in the following weights:

Type of White Board Weight (g/m2)Bleached Board 195 - 205Duplex Board 150 - 450Cardboard 160 - 250 Liquid Packaging Board 150 - 290Poster Paper 40 - 90

TECHNICAL EXPERTISE

Production capacity exceeds 100,000 tonnes per annum, from four main paper

machines of different capabilities. These paper machines are supported by two


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pulp mills and a chemical recovery and effluent treatment plant along with

allied support services.

Packages Limited is among the first companies in the world to manufacture

paper & paper board using a pulp mixture of wheat straw, kahi grass, cotton

linter, recycled pulp and wood pulp. These environment-friendly processes use

fewer chemicals, resulting in improved strength properties and increased

stacking strength of containers.

Paper and Board Products

1. Board .

Coated Bleached Board.

Coated Tea Duplex Board.

Coated White Duplex Board.

Coated White Lined Grey Back Board.

Coates WLC Board.

Duplex Board.

Kraft Lined Board.

Special Liner.

Special Clay Coated Tetra Board.

Special White Duplex Board.

Stiffener Board for Soap.

Tetra Classic Paperboard.

Tetra Duplex Board.

TM liner.

Uncoated Tea Board.

Unlined Grey Board.

White Bleached Board.

White Card Board.


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Coated White Card Board.

White Duplex Board.

WLC Board.

2. Paper .

Corrugating Machine Paper.

MF offset Paper.

MF writing Printing Paper.

MG sulphate Paper.

MG Kite Sulphate Paper.

Photo copy Paper.

White MG Poster Paper.

White Poster Paper.

Special Poster Paper.

Special Brown Kraft Paper.

Brown Kraft Paper.

Gumming Kraft Paper.

Golden Kraft Paper.

Tissue Paper.

Toilet Paper.

Recycled Tissue Paper.


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CARTON BUSINESS UNIT The carton business unit is an integral part of the manufacturing facilities at

Packages. Constant improvements in technology help our customers exert exact

control over each stage of the manufacturing process. Customized packaging

and consistent quality give all Packages cartons superior shelf visibility.

The foundations of this business line were laid about 50 years ago with the

formation of the offset printing department. Carton Business Unit production

experts work closely with pre-press and technical staff to deliver a durable,

aesthetically pleasing and technically sound package to the customer.

The total board consumption of the carton line is around 18 - 20 thousand

tonnes per annum. The strong backward integration within the Packages value

chain has given the carton line a competitive edge in terms of backend material

availability. Prompt material availability reduces turn around time and ensures

timely delivery.

Industries

Carton products of packages serve

following industries:

Food and Beverages

Soap / Detergent

Pharmaceuticals

Match

Electronics

Shoe


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Tobacco

Paper Cup

TECHNICAL EXPERTISE

The Carton Business Unit's technical competence is reflected through two

modes of printing: offset and rotogravure. The former is a high end tool for

more complex design themes while the latter consistently services high volume

orders. Packages expanded the line through installation of a new Lemanic

rotogravure printing and inline cutting creasing machine in the year 2000.

New lines have been introduced with the addition of a Roland 700 double

coater in the Offset Printing department, a Bobst Evoline in the Cutting and

Creasing and a Bobst Media 100 in the Folding and Gluing departments. The

state-of-the-art Roland 700 with twin coating has enabled Packages to

introduce innovative printing with special effect coating and gold coatings.

The commissioning of the new in-house CIM Line has made advanced counter

milling, laser cutting, and blade bending machines available for high quality

die making. Customers can now take advantage of even higher precision and

consistency in cutting and creasing.

CORRUWAL BUSINESS UNIT

Packages has been manufacturing corrugated cartons since 1974. Produced in a

variety of sizes, these cartons are of great value for in-country goods


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distribution and export. Capacity increase and product development continue to

be of high priority.

Corrugated cartons are of great value to its diverse portfolio of customers for

secure transportation of their products to local and international markets. With

the commissioning of our corrugated plant in Karachi, it has the capability of

producing seven million corrugated cartons to cater to the ever-increasing

demand of high quality shipping cartons.

Industries

Packages corruwal business unit serves


Textile

Food

Tobacco

Soap

Detergent

TECHNICAL EXPERTISE

The corrugated finishing division can print in up to three colours. Customers

have the flexibility to choose from regular slotted containers (RSC), glued,

RSC stitched or die cut cartons.

PRODUCT DEVELOPMENT

After customer feedback and extensive research, Packages has developed

special liner and fluting that gives extra strength to containers, in particular

increasing their stacking strength and their resistance to bursting.


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FLEXIBLE BUSINESS UNIT With improved barrier properties and lower cost compared to rigid packaging,

flexible packaging is steadily gaining importance in the packaging industry.

Packages flexible line makes high quality packaging films and laminates, and

offers other specialized services such as rotogravure printing and sleeve-

making.

Flexible packaging combines different plastic films, aluminum foil and paper

to produce laminates of two or more layers for providing layered protection

against moisture, gases and odours. Used where colourful package design and

preserving product quality are important, such as in the food and

pharmaceutical industries, flexographic printing offers economy with quality.


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Industries

The flexible business unit serves


Soap

Tobacco

Tea

Food

Diary Ice-Cream

Milk powder

Confectionery

Shampoo

Pesticide

Pharmaceutical


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CONSUMER PRODUCTS

A range of products for those annoying problems in life: consumer products

feature great ideas for making everyday living easier and more comfortable,

both indoors and out.

Tissue Products

Personal Hygiene

Paper Products

Reflecting core values of exceeding customer expectations through innovation,

leadership and teamwork, the Rose Petal and Tulip brands continue to hold

over 80% of the domestic market share of the tissue paper market in Pakistan.

It also has a leading market share in the away-from-home business: it supplies

custom-printed boxes, table napkins, coasters and paper cups to institutions

such as hotels, fast food chains, restaurants, businesses and the airline industry.


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Various customers of Packages Limited

There is hardly any product in the market which is delivered to customer

without packing. Packages is a giant in paper, board, packaging and consumer

products like facial tissues, toilet rolls, paper cups, paper plates , napkins and

sanitary pads. Following is a list of some of renowned companies who are

regular customers of packages limited and have benefited from packages’s

customizable solutions.

Unilever Pakistan.

Nestle Pakistan.

Walls Ice Cream.

Proctor & Gamble.

Rafhan Maze Products.

Kolson Pakistan Limited.

Murree Brewery.


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Reckitt Benkiser.

Tetra-Pak Pakistan.

National Foods Limited.

Shan Foods.

Pakistan Tobacco Company Limited.

Tetley Clover.

Pakistan International Airlines.

McDonalds Pakistan.

Colgate Palmolive.

Chaman Ice-Cream The Mall Lahore.

Punjab TextBook Board.

Pak Electron Limited (PEL).

Mitchell Pakistan.

Nirala Sweets.

Sufi Banaspati.

Nishat Mills.

Glaxo-Smith Kline.

Qarshi Pakistan.

Pakistan Oil Mills.

Knorr Foods Limited


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NATURE OF BUSINESS & MANUFACTURING

PROCESS

Packages Limited is the manufacturer of Paper & Paperboard and its

conversion into packaging products.

Packages Limited has the following three divisions:

1. Paper Board Division.

2. Packaging Division.

3. Tissue Division.

PAPER & BOARD DIVISION

Manufacturing process of Paper Board Division is divided into following:

a) Pulp Making.

b) Paper & Paperboard Manufacturing.

1. PULP MAKING

Following processes are involved in the pulp manufacturing

o Straw Preparation

o Straw Cooking

o Straw Washing & Screening

o Straw Pulp Bleaching

o Straw Pulp Beating

oStraw Preparation:

Raw materials i.e. straw and kahi are cut and cleaned with dry and wet process

and transferred to New Fibre Line for cooking and washing.


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oCooking in New Fibre Line:

Cleaned material received from straw preparation department is cooked in

continuous digester tubes with steam and chemicals.

oStraw Pulp Washing & Screening:

Cooked material is washed and screened in this process and transferred to

beater house as unbleached straw pulp or to Bleaching House for bleaching for

this pulp.

oStraw Pulp Bleaching:

Unbleached straw pulp received after washing and screening process is

processed with bleaching chemicals and transferred to Beater House as

bleached straw pulp.

oWASTE PAPER PULP:

Waste paper is fed into pulper, where material is washed & cleaned and

transferred to Beater House for processing.

oIMPORTED PULP:

Imported pulp is fed to refiners for treatment of fibres to get the desired

strengths and properties. After this process pulp is transferred to Beater House.

oStraw Pulp Beating:

Different types of pulps are blended and chemicals are added according to the

required specification of paper and paperboard and processed pulp is fed

to Paper Machine.

2. PAPER AND BOARD MANUFACTURING PROCESS

The blend of stocks is then transferred to the machine chest for feeding into the

paper machine, first to the perforated wire through Head Box. The Head Box or

forming zone spreads fibres evenly on the perforated wire; water is gradually


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removed by natural and mechanical means. After the wire part, the sheet of

fibres “wet web” is pressed to de-water further to dryness in the press section

and thereafter the sheet is dried in the drying section, where it passes over the

steam heated roll to get the final dry sheet as finished paper and paperboard.

PROCESS INVOLVED IN THE MANUFACTURING OF BOX BOARD

AND CONE BOARD (CHIP BOARD) BASED ON WHEATSTRAW

AND WASTEPAPER.

o PULPING OF WHEAT STRAW:

Wheat straw/kahi is employed for making pulp for use in the manufacturing of

various kinds of paper and paperboard including box board, cone board (chip

board). Wheat straw can be pulped by various processes, however, at Packages

Limited we follow Neutral Sulphite Process and sodium sulphite is the main

cooking chemical.

Wheat straw received by various means of transportation at the factory undergo

dedusting and cleaning operation where dust and unwanted materials like sand,

stones, grains are removed from the wheat straw. The cleaned straw is fed to

the mixing tank through conveyers and the cooking chemicals are added, then

the straw is fed to the continuous digesters where the delignification process

takes place at a temperature at 170 C and steam pressure of 11 bars for a

period of 45 minutes. The cooked straw which undergoes the delignification

and the fibres are separated from the black liquor by washing and screening is

stored as unbleached straw pulp in silo (high density tower).

Part of unbleached pulp after bleaching operation in the sequence of Hypo-

Hypo to make bleached straw pulp of brightness 80 GE is also stores in high

density tower for onward supply to the board machine as required.


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o MANUFACTURING OF BOX BOARD:

Box board consists of a three layers board with top layer of bleached straw pulp

and wood pulp in the ratio of 75% and 25% plus additive chemicals, body

mainly of recycled waste paper pulp and the under layer of wheat straw pulp

(bleached or semi-bleached).

These pulps are blended in different chests for feeding the board machine with

three four drinier wires. Forming system which produces a triplex board called

box board in substance ranging from 200-450 gm2. The forming zone produces

a uniform wet sheet and all three layers are married together as single sheet

which is dewatered through presses to a dry content of 40% and later dried by

passing over multi steam heated cylinder (dryer). The board is calendared to a

uniform smooth surface and is rolled a smother reel which is later slitted to the

required size of reminder for marketing as finished goods.

o MANUFACTURING OF CONE BOARD (CHIP BOARD):

The product is mainly produced from waste paper pulp which can be blended

with a certain ratio of straw pulp (unbleached).

o WASTE PAPER PULP PROCESS:

The waste paper is re-pulped in hydro pulper with water and no chemical is

used. The impurities present in the waste paper like plastic, magnetic, stones

and other contraries are removed through successive cleaning and screening.

Waste paper pulp is similarly stored in a silo for supply to the paper machine as

required. Cone board (chip board) is a multilayer board. The manufacturing is

similar to box board except it is not sized whereas the box board is sized board,

however, the surface could be smooth and uniform and normally it is in the

substance ranging from 300-460 gm2.


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PACKAGING DIVISION

MANUFACTURING PROCESS

Packages has following production lines in Packaging Division;

1. Carton Line

2. Flexible Line

3. Corrugation Line

1. CARTON LINE

Carton line produces paper-board cartons for its customers for various needs

like:

o Cigarette cartons

o Tea cartons

o Food cartons

o Medicine cartons

o Detergent cartons etc.

Major raw materials used are coated/uncoated board, offset inks and roto inks.

Carton Line consists of following departments & activities/processes:

i. Coating :

o Clay Coating.

o Poly Coating

o Slitting

ii. Paper Store :

o Sheeting

o Guillotine

o Slitting


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iii. Reproduction :

o Cylinder Engraving

o Photopolymer Making

o Offset Plate Making

iv. Art & Camera :

Designing

v. Offset Printing

vi. Cutting Creasing

vii. Breaking

viii. Folding Gluing

ix. Packing

x. Paper cup making

xi. Lemanic:

Inline Roto printing, embossing & cutting & creasing

2. FLEXIBLE LINE

Flexible Packaging Line produces various kinds of packing materials to satisfy

packaging requirements of the customers for soap, cigarette, tea, food,

confectionery etc. Major raw materials used in flexible line are plastic films,

poly granules, al-foil, paper, liquid inks and laminating materials.

Flexible Line consists of following departments & processes:

i. Paper Converting :

Flexographic Printing

Slitting

Bag Making


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Packing

ii. Flexible Packaging:

Rotogravure Printing

Lamination (Solvent less & Solvent based Lamination)

Extrusion (Mono, Three & Five Layer Extrusion)

Waxing

Slitting

Bag Making

Sleeve Making

Sealing

Packing

Main products of Flexible Line are:

Oil Films

Poly Bags

Cone Wrappers

Sleeves

Shampoo Sachets

Tea Sachets

Toffee Paper

Soap Wrappers

Cigarette Parceling Paper

Various laminates for food packing

3. CORRUGATION

Corrugation line produces single wall and double wall corrugated boxes for

Textile, Detergents, Cigarette and Food industries. Raw materials used in

manufacturing process are liner, fluting paper, water base inks and starch glue.


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Corrugation line consists of following processes:

Corrugation

Sheeting

Flexographic Printing

Slotting & creasing

Stitching / gluing

Packing

Main products of Corrugation are:

Single Wall Corruwalls

Double Wall Corruwalls

Partitions

CONSUMER PRODUCTS DIVISION (CPD)

MANUFACTURING PROCESS

It consists of the following departments;

Tissue Manufacturing

Tissue Conversion

TISSUE MANUFATURING

Tissue Manufacturing consists of following plants:

Waste paper plant

Paper Machine ΙV


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The basic raw materials used in tissue manufacturing are soft wood pulps,

Eucalyptus pulp, Bleached linter pulp, Waste paper pulps and different types of

dyes and chemicals.

The wood pulp and waste paper are repulped with water. The impurities in

waste paper are removed through cleaning and screening. Waste paper pulps

are stored in the chests and supplied to the Paper machine.

TISSUE CONVERSION (CPD)

Tissue conversion consists of the following processes:

I. Inter folding

II. Cup Making

III. Roll Making

IV. Paper plates

V. Coaster

VI. Wet Tissue

VII. Sanitary Napkins Making

VIII. Packing

Main products of CPD Conversion are:

Facial Tissues

Kitchen & Toilet Rolls

Wet Tissues

Paper Napkins

Paper Cups

Coasters

Paper Plates


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Sanitary Napkins


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ORGANIZATIONAL CHART


Chairman

Project Director BSPM

Executive Board

General Manager

Managing Director

Advisor

Consumer Product Manager

Deputy GM

CSD Manager

Marketing Manager

Manager Tissue Production

HRD Manager

IR Manager

QC Manager

Rubber Manager

BU Carton Flexible Corruwall

Mill Manager

Group Brand Manager

Stores & Inventory Manager

Sales & Product Manager

Commercial Manager

Finance Manager

R&D Manager

IP ManagerI/C CPD Production

ERP manager

Tech Manager Mech Power

Liaison & Admin Manager

Board of Director

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FINANCIAL RATIO ANALYSIS

Financial ratios are useful indicators of a firm's performance and financial

situation. Financial ratios can be used to analyze trends and to compare the

firm's financials to those of other firms. Ratio analysis is the calculation and

comparison of ratios which are derived from the information in a company's

financial statements. Financial ratios are usually expressed as a percent or as

times per period. Ratio 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 strength and weaknesses of a firm as well as its historical performance

and current financial condition can be determined. The term ratio refers to the

numerical or quantitative relationship between two variables. With the help of

ratio analysis conclusion can be drawn regarding several aspects such as

financial health, profitability and operational efficiency of the undertaking.

Ratio points out the operating efficiency of the firm i.e. whether the

management has utilized the firm’s assets correctly, to increase the investor’s

wealth. It ensures a fair return to its owners and secures optimum utilization of

firm’s assets. Ratio analysis helps in inter-firm comparison by providing

necessary data. An inter firm comparison indicates relative position. It provides

the relevant data for the comparison of the performance of different

departments. If comparison shows a variance, the possible reasons of variations

may be identified and if results are negative, the action may be initiated

immediately to bring them in line.

Ratios are used by both internal and external analysts

Internal uses

· Planning

· Evaluation of management

External uses

Credit granting

Performance monitoring


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Investment decisions

Making of policies

For the purpose of analysis we use following kinds of ratios: -

A. Activity Ratio

B. Short Term Liquidity Ratios

C. Profitability Ratios

D. Investor Ratios

E. Long Term Analysis

A) ACTIVITY RATIO

An indicator of how rapidly a firm converts various accounts into cash or sales.

In general, the sooner management can convert assets into sales or cash, the

more effectively the firm is being run. In activity ratios we have calculated

following ratios: -

Account Receivable Turnover

Aging of A/R

Inventory Turnover

Days Sales in Inventory

Working Capital Turnover

Currents Assets turnover

Fixed Asset Turnover

Total Assets Turnover

Account Receivable Turnover

An accounting measure used to quantify a firm's effectiveness in extending

credit as well as collecting debts. The receivables turnover ratio is an activity


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ratio, measuring how efficiently a firm uses its assets. Account receivable

turnover for Packages Limited Lahore is given below: -

2008 2007 2006 2005 2004

8.69 Times 8.56 Times 9.77 Times 9.96 Times 9.35 Times

8.698.569.779.96

9.35

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2004 2005 2006 2007 2008

Series1

This ratio tends to increase when credit sales increase or account receivables

decreases and vice versa. This ratio is reliable if company’s business is not

seasonal. The higher the turnover ratio the shorter the time period between the

credit sales and cash collection.

Here from above computation it can be directly observed that firm’s Account

receivable turnover ratio has been fluctuating from 2004 to 2008. This ratio

increase from 2004 to 2005 and then starts decreasing in next 3 years. This is

due to company has increased its credit sales in these years but the times credit

collection has been made decreased which is not a favorable indicator for the

company. However slight increase in 2008 is showing company’s strength than

2007 but overall. But overall the company has lost its efficiency of credit

collection than the past.


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Aging of Account Receivables

Average number of days a firm takes to collect payments on goods sold.

Numbers much higher than 40 to 50 days indicate collection problems and

significant pressure on cash flows. Numbers much lower than 40 to 50 days

indicate overly-strict credit policies that might be preventing higher sales

revenue. Also called days sales in receivables or debtor days. The account

receivable days for Packages limited Lahore for the year 2004-2008 has been

given below: -

2008 2007 2006 2005 2004

41.98 Days 42.65 Days 37.35 Days 36.64 Days 39.05 Days

41.9842.65

37.3536.6439.05

0.00

10.00

20.00

30.00

40.00

50.00

2004 2005 2006 2007 2008

Series1

On the basis of evaluation made we can clearly see that the average days of

collecting account receivable has been revolving around 40 days in the

analyzed years which is favorable sign for the company. The company had

strict credit policies from year 2004 to 2006 but after that attractive credit

policy encourages the sales and the sale has been increased.

Inventory Turnover

Number of times a firm's investment in inventory is recouped during an

accounting period. Normally a high number indicates a greater sales efficiency


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and a lower risk of loss through un-saleable stock. However, an inventory

turnover that is out of proportion to industry norms may suggest losses due to

shortages, and poor customer-service. Inventory Turnover of Packages limited

for the years 2004-2008 has been given below: -

2008 2007 2006 2005 2004


3.043.10

3.563.80

3.17

0.00

1.00

2.00

3.00

4.00

5.00

2004 2005 2006 2007 2008

Series1

The inventory turnover for the company has been revolved in the rage of 3 to 4

times in the analyzed years. Initially in 2005 the company has improved its

inventory turnover but after 2005 there is decline which shows the slow effect

in company production process. The inventory mobilization in to finished

goods has been weakened over the last year which is not good sign for the

company showing inefficiency of the company because the company is not

able to convert its inventory into sales than the past.

Days Sales in Inventory

This ratio measures the number of days an item is held as inventory before it is

sold. The lower the days inventory, the more efficient the company is, all other

things being equal. Day’s inventory is the first step measured in the cash

conversion cycle, followed by Days Sales Outstanding and days payable


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outstanding. Day’s sales in inventory for the Packages Limited Lahore have

been given as under: -

2008 2007 2006 2005 2004

120 Days 118 Days 103 Days 96 Days 115 Days

120118103

96

115

0

20

40

60

80

100

120

140

2004 2005 2006 2007 2008

Series1

The lowest number of Days Company’s inventory held for sale is in 2005 with

compare to all other years because in all other years inventory to sales

operations take more days than 2004. After 2005 the number of days is

continuously increasing which is not good indicator for the company because

the time taken by the company to convert its inventory into sales has been

increasing which show the inefficiency of the inventory to sales operations of

the company.

Working Capital Turnover

This ratio provides some useful information as to how effectively a company is

using its working capital to generate sales. A company uses working capital

(current assets - current liabilities) to fund operations and purchase inventory.

These operations and inventory are then converted into sales revenue for the

company. The working capital turnover ratio is used to analyze the relationship

between the money used to fund operations and the sales generated from these

operations. In a general sense, the higher the working capital turnover, the


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better because it means that the company is generating a lot of sales compared

to the money it uses to fund the sales. The working capital turnover for

Packages Limited Lahore from the year 2004-2008 has been given below: -

2008 2007 2006 2005 2004


9.36

3.14

7.12

3.19

8.86

0.001.002.003.004.005.006.007.008.009.00

10.00

2004 2005 2006 2007 2008

Series1

This ratio over the year has been 1st increased and then decreased over the

years. In the year 2008 the ratio highly increased and shows the efficiency of

the company funding, utilizing these funds to convert in generating sales

however the past trend is indicating that this ratio will be decreased next year.

The year 2008 has been proved the best year among all shows the greater effort

and efficiency of the management.

Currents Assets turnover

Current Assets Turnover ratio shows the productivity of the company's current

assets. This ratio indicates how efficiently a firm is using its current assets to

generate revenue to meet its short term expenses. Higher the ratio is favorable


http://www.businessdictionary.com/definition/revenue.html

http://www.businessdictionary.com/definition/current-asset.html


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sign for the company. The current asset turnover of the Packages Limited

Lahore for the year 2004 to 2008 is given below: -

2008 2007 2006 2005 2004


1.721.78

2.10

1.41

2.20

0.00

0.50

1.00

1.50

2.00

2.50

2004 2005 2006 2007 2008

Series1

This ratio measures the number of times the firm’s current assets has

contributed in generating sales. This ratio shows the highest figure in 2004

among all the years. After the increase in the year 2006 this ratio has been

continuously decreasing in next years. We can clearly see that after the year

2006 the firm has decreased its efficiency in using its current assets to generate

the revenue. This happened because the increasing amount of CGS over the

years. The company has to bear high cost of CGS and operating expensed than

earlier. The company’s current assets are not growing rapidly as compare to

CGS and expenses. This is not a good sign for the company.

Fixed Asset Turnover

Measure of the productivity of a firm, it indicates the amount of sales generated

by each unit spent on fixed assets, and the amount of fixed assets required to


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generate a specific level of revenue. Changes in this ratio over time reflect

whether or not the firm is becoming more efficient in the use of its fixed assets.

The fixed asset turnover of the Packages Limited Lahore is given below: -

2008 2007 2006 2005 2004


0.530.570.80

1.48

1.82

0.000.200.400.600.801.001.201.401.601.802.00

2004 2005 2006 2007 2008

Series1

This ratio measures the efficiency of the management in using its fixed assets

for generating sales that how many times firm has converted its fixed assets in

generating sales. Higher the ratio is the favorable indicator for the company.

This ratio of the firm has been decreasing year after year which is not favorable

indicator for the company. This ratio shows that the firm is loosing its

efficiency of using fixed assets to generate the sales. This ratio is also

indicating that the percentage of increase in fixed assets is greater that the

percentage of increase in sales which leads to the inefficiency of firm’s

management in using its fixed assets.

Total Assets Turnover

Asset turnover is a financial ratio that measures the efficiency of a company's

use of its assets in generating sales revenue or sales income to the company.


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0.360.32

0.46

0.78

0.92

0.000.100.200.300.400.500.600.700.800.901.00

2004 2005 2006 2007 2008

Series1


Higher the ratio shows the efficiency of the management i.e. using its total

assets efficiently in generating sales. The total assets turnover for the Packages

Limited Lahore is given as under: -

2008 2007 2006 2005 2004


This ratio measures that how many times the firm has converted its total assets

in generating sales. This ratio has been continuously decreased from the year

2004 to 2007 showing the inefficiency of firm’s in using its total asset in

generating sales. However in 2008 there is a slight increase in this ratio

interpreting little bit efforts of management with compare to previous year but

overall this ratio has been showing inefficiency of the management which is

not good sign for the company.


67 of 136


Short Term Liquidity Ratios

Liquidity ratios provide information about a firm's ability to meet its short-term

financial obligations. They are of particular interest to those extending short-

term credit to the firm. To measure the short term liquidity of the company we

will calculate the following ratios: -

Current Ratio

Acid Test Ratio

Cash Ratio

Cash Flow from Operations Ratio

Operating Cycle

Working Capital

Current Ratio

Indicator of a firm's ability to meet short-term financial obligations, it is the

ratio of current assets to current liabilities. Though every industry has its range

of acceptable current-ratios, a ratio of 2:1 is considered desirable in most

sectors. Since inventory is included in current assets, acid test ratio is a more

suitable measure where salability of inventory is questionable. The current ratio

of the Packages Limited Lahore from the year 2004 to 2008 has been given

below: -

2008 2007 2006 2005 2004

1.23:1 2.46:1 1.48:1 1.95:1 1.39:1



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1.23

2.46

1.481.95

1.39

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2004 2005 2006 2007 2008

Series1

The current ratio shows how a firm is able to cover its current liabilities with its

current assets it shows the liquidity of the company.

The ratio signifies variant pattern with rising and falling observations. The ratio

shows that firm has managed to create a good combination of the current assets

and liabilities making it financially sound and liquid enough to cover its

liabilities.

There is however a substantial increase in the year 2007 as compares to the

remaining ones. This phenomenon is because the firm has comparatively little

abound of current liabilities.

Acid Test Ratio

Key measure of a firm's liquidity, it answers the question "Can this firm meet

its current obligations from its liquid assets if suddenly all sales stop?" More

stringent than 'current ratio,' it excludes inventories (typically the least liquid of

current assets) to concentrate on the more liquid assets of the firm. Usually an

acid test ratio of 1.0 or higher is considered satisfactory by lenders and

investors. Also called acid ratio or quick ratio. The acid test ratio of Packages

Limited Lahore for the year 2004 to 2008 has been given as under: -

2008 2007 2006 2005 2004

0.43 :1 1.66 :1 1.60 :1 2.94 :1 1.64 :1


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0.43 :1

1.66 :11.60 :1

2.94 :1

1.64 :1

0.00 :10.50 :11.00 :11.50 :12.00 :12.50 :13.00 :13.50 :1

2004 2005 2006 2007 2008

Series1

The above comparison shows the falling and rising patterns in the ratio.

However the after increasing in 2005 there is decrease in this ratio of the firm

but in the year 2008 there is a great decline in this ratio. This is due to the

couple of reasons.

The increase in current liabilities of the company is near about 3 times to

the previous year 2007.

Second firm’s inventories increase near about 2 times with compare to

the previous year 2007.

As inventory is least liquid current asset which can not meet the firm’s current

liabilities that is why after deducting the inventory from current assets firm has

43% of current assets to meets its current liabilities which is not favorable

indicator for the company. This ratio shows the poor liquidity position of the

company.

Cash Ratio

Comparison of cash plus cash equivalents to current liabilities. Also called

liquidity ratio, it is a refinement of quick ratio and indicates the extent to which

the readily available funds can pay off the current liabilities. Higher the ratio is

the favorable sign for the company. The cash ratio of Packages Limited Lahore

for the year 2004 to 2008 is: -


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2008 2007 2006 2005 2004

0.04 :1 0.05 :1 0.05 :1 0.86 :1 0.08 :1

0.04 :10.05 :10.05 :1

0.86 :1

0.08 :10.00 :1

0.20 :1

0.40 :1

0.60 :1

0.80 :1

1.00 :1

2004 2005 2006 2007 2008

Series1

This ratio will measure how much firm has cash and cash equivalents to meet

its current liabilities. There is not so much variation in this ratio except 2005.

This is due to in the year 2005 the firm has lower amount of current liabilities.

This ratio is showing lower figure because the company has most of its current

assets in the form of net receivables and inventories. Second the firm has not

even single short term marketable security. Packages ltd have very low amount

in hand as compare to its current liability. It seems to be not a favorable sign

for the company.

Cash Flow from Operations Ratio

The Cash Flow from Operations ratio (also: Operating Cash Flow) is used to

determine the extent to which cash flow differs from the reported level of either

Operating Income or Net Income. (Under both IFRS and US GAAP a company

can still easily report healthy income figures, even while its cash resources are

poor).


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In other words: it is a check on the quality of a company's earnings. It's

arguably a better measure of a business's profits than earnings, because a

company can show positive net earnings and still not be able to pay its debts.

A difference in this ratio and Reported Earnings is indicative of substantial

non-cash expenses or sales in the reported income figures and if a firm reports

record earnings but negative Operating Cash Flows, it may be using aggressive

accounting techniques. If the Cash Flow from Operations ratio is substantially

less than one or decreasing / poor over a longer period of time, cash flow

problems are likely. The cash flow from operation of Packages Limited Lahore for

the year 2004 to 2008 is given below: -

2008 2007 2006 2005 2004

0.23 :1 0.64 :1 0.55 :1 0.59 :1 0.73 :1

0.23 :1

0.64 :1

0.55 :10.59 :1

0.73 :1

0.00 :1

0.10 :1

0.20 :1

0.30 :1

0.40 :1

0.50 :1

0.60 :1

0.70 :1

0.80 :1

2004 2005 2006 2007 2008

Series1

This ratio of the firm has been decreased from 2004 to 2006 and after increase

in 2007 there is abrupt decline in the year 2008. The reasons behind the abrupt

change in this ratio are: -

The increase in firm’s Current liabilities is 5 times higher with compare

to the previous year 2007. The increase in current liabilities is due to


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abrupt increase in Finance under markup arrangement and firm’s current

maturity of long term debt.

Second major reason is that the firm has decreased 50% its operating

profit with compare to 2007. The reason behind is that firm CGS has

been increased up to 69% during the year 2008.

Overall this ratio is indicating not a healthy sign for the company.

Operating Cycle

One complete process that any input-output system undergoes, and in which

the initial and final states are identical. Average time taken by a firm in

converting merchandise or raw material back into cash. Lower the answer of the

ratio is the favorable sign for the company and vice versa. The operating cycle for

Packages Limited Lahore for the year 2004 to 2008 is as under: -

2008 2007 2006 2005 2004

162 Days 160 Days 140 Days 133 Days 154 Days

162160

140133

154

0

40

80

120

160

2004 2005 2006 2007 2008

Series1

This ratio measure the time taken by the firm to complete its operating cycle

starting from inventory to receiving amount from creditors. This ratio after



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declining in 2005 has been increased since 2008. However increase in 2007

and 2008 is unusual. This is because of following reasons: -

The days of account receivable collection of the company has been

increased in these two years.

Company is taking so much time to convert its inventory into sales than

earlier.

This ratio is not showing the healthy sign for the company because the

operating cycle days of the company has been increased leading towards slow

progress of firm’s operations.

Working Capital

Cash or equivalent to cash or inventory available for day to day operations of a

firm. Strictly speaking, one borrows cash (and not working capital) to be able

to buy assets or to pay for obligations. Also called current capital. This is the

indication of the short run solvency of the company. Higher the amount of working

capital, showing strength of the company. The working capital for Packages Limited

Lahore for the year 2004 to 2008 is as under: -

2008 2007 2006 2005 2004

1,306,588,000 2,872,021,000 1,101,998,000 2,222,907,000 675,932,000

1,306,588

2,872,021

1,101,998

2,222,907

675,932

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

2004 2005 2006 2007 2008

Thou

sand

s

Series1


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http://www.businessdictionary.com/definition/operations.html



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This ratio for the firm shows the rising and falling patterns. It increase and then

decrease year after year respectively. The highest figure is shown in the year

2007 in which the firm has highest working capital with compare to all the

years. Both the current assets and current liabilities of the firm have been

increased in the year 2008 but working capital is decreased in the year 2008.

The reason behind this fact is: -

Increase in firm’s current liability is much larger than the change in

increase in the current assets. The current liabilities have been increased

3 times while the current assets increase 1.5 times with compare to the

previous year from the year 2007 to 2008.

This ratio is not showing good sign for the company because the spread

between the current liabilities and current assets is not lesser.


75 of 136


C) Profitability Ratios

A class of financial metrics that are used to assess a business's ability to

generate earnings as compared to its expenses and other relevant costs incurred

during a specific period of time. For most of these ratios, having a higher value

relative to a competitor's ratio or the same ratio from a previous period is

indicative that the company is doing well.

Some examples of profitability ratios are profit margin, return on assets and

return on equity. It is important to note that a little bit of background

knowledge is necessary in order to make relevant comparisons when analyzing

these ratios.

For instances, some industries experience seasonality in their operations. The

retail industry, for example, typically experiences higher revenues

and earnings for the Christmas season. Therefore, it would not be too useful to

compare a retailer's fourth-quarter profit margin with its first-quarter profit

margin. On the other hand, comparing a retailer's fourth-quarter profit

margin with the profit margin from the same period a year before would be far

more informative.

In this section we will calculate following ratios: -

Net profit margin

Operating profit margin

Profit before tax Margin

Gross profit margin

Return on asset

Return on Total Equity

Return on common equity

Return on investment

Operating Asset Turnover

Return on Operating Asset


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Duo Pont return on Total Asset

Duo Pont return on Operating Asset

Net profit margin

This ratio measures how much out of every unit of sales a company actually

keeps in earnings. Profit margin is very useful when comparing companies in

similar industries. A higher profit margin indicates a more profitable company

that has better control over its costs compared to its competitors. Profit margin

is displayed as a percentage; a 20% profit margin, for example, means the

company has a net income of 0.20 for each unit of sales. It is also known as Net

Profit Margin.

Looking at the earnings of a company often doesn't tell the entire story.

Increased earnings are good, but an increase does not mean that the profit

margin of a company is improving. For instance, if a company has costs that

have increased at a greater rate than sales, it leads to a lower profit margin.

This is an indication that costs need to be under better control. The net profit

margin of Packages Limited Lahore for the year 2004 to 2008 is: -

2008 2007 2006 2005 2004

(1.60) 47.91% 77.75% 14.30% 15.99%

(1.60)

47.91%

77.75%

14.30%15.99%

(5.00)

17.00

39.00

61.00

83.00

2004 2005 2006 2007 2008

Series1


77 of 136


This ratio after a little bit decreasing in 2005 increase highly in 2006 and then

started declining and at the end there is negative profit / loss in 2009. The

highest value among all is during the year 2006 i.e. 77.75% of net sales. This is

because the company has highest net profit during this year. The extraordinary

increase in profit is due to following reasons: -

Company has gained dividend income from the other related parties.

Company has earned so much on the sale of loan of long term

investments i.e. gain on sale of long term investments.

However in 2008 company has to face loss. The reasons behind facing this loss

are as under: -

Company’s CGS cost has been increased 1.5 times as compare to

previous year 2007.

The company has to pay huge amount of interest rate for his debts

including Interest and mark up including commitment charges on

o Long-term finances

o Finances under mark up arrangements

o Finance lease

o Loan handling charges

o Loss on cross currency swap

o Exchange loss

o Bank charges

Decrease in this ratio is not a favorable indicator for the company, it is very

dangers for the health of the company.

Operating profit margin

Operating profit for a certain period divided by revenues for that period.

Operating profit margin indicates how effective a company is at controlling the

costs and expenses associated with their normal business operations. Higher the

ratio is to be considered a favorable sign for the company and vice versa. The


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operating profit margin for Packages Limited Lahore for the year 2004 to 2008

is as under: -

2008 2007 2006 2005 2004

3.32% 8.12% 11.70% 14.03% 14.59%

3.32%

8.12%

11.70%14.03%14.59%

0.00%

5.00%

10.00%

15.00%

20.00%

2004 2005 2006 2007 2008

Series1

This ratio has been declining over the years. The parentage of decrease in the

year 2008 is higher among all. Though net sales of the company have been

increasing over the years but the operating profit has been decreased more than

the increase in the sales. The major reason behind the decrease in operating

profit is: -

The continuous increase in firm’s Cost of Goods Sold.

The continuous increase in firm’s operating expenses.

Overall this ratio is not favoring the company. This ratio is not a good indicator

for the health of company.

Profit / Loss before tax Margin

The amount by which net income before tax exceeds expenditure. It represents

the amount of sales revenue that a company earns as pre-tax profits. It is useful

way of comparing businesses in the same industry because it eliminates the

variable of taxation which can be effected by many things. The profit / loss

before tax margin for Packages Limited Lahore for the year 2004 to 2008 is: -


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2008 2007 2006 2005 2004

(2.52) 51.31% 80.90% 18.73% 19.82%

(2.52)

51.31%

80.90%

18.73%19.82%

(20.00)

-

20.00

40.00

60.00

80.00

100.00

2004 2005 2006 2007 2008

Series1

This ratio same like net profit margin after a little bit decreasing in 2005

increased highly in 2006 and then started declining and at the end there is

negative profit / loss in 2009. The highest value among all is during the year

2006 i.e. 80.90% of net sales. This is because the company has highest profit

before tax during this year. The reasons behind extraordinary increase in profit

are same as net profit margin i.e.: -

Company has gained dividend income from the other related parties.

Company has earned so much on the sale of loan of long term

investments i.e. gain on sale of long term investments.

However in 2008 company has to face loss. The reasons behind facing this loss

are same as net profit margin i.e.: -

Company’s CGS cost has been increased 1.5 times as compare to

previous year 2007.

Company’s financial cost and interest expense has been increased highly

which caused loss to the company.

The expense of the company after the year 2006 has been increasing and

increase in such expense during the year 2008 is very high which is not good

for the health of the company. This ratio is indicating unfavorable sign for the

company.

Gross profit margin


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What remains from sales after a company pays out the cost of goods sold. To

obtain gross profit margin, divide gross profit by sales. Gross profit margin is

expressed as a percentage. Higher the ratio is the favorable sign for the company

and vice versa. The gross profit margin for Packages Limited Lahore for the year

2004 to 2008 is as under: -

2008 2007 2006 2005 2004

7.72% 13.28% 16.50% 19.06% 21.86%

7.72%

13.28%16.50%

19.06%21.86%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2004 2005 2006 2007 2008

Series1

The gross profit margin for Packages Limited Lahore has been decreasing year

after year. However company’s sales are increasing year by year but the change

in company’s CGS is higher than the change in sales which leads to continuous

decrease in this ratio. Especially in the year 2008 this ratio highly decreased

than early years because of CGS increased near about 1.5 times and the sale is

only increase 1.35 times witch comparing to the last year. The major reasons

behind the increase in CGS are: -

Cost of Raw material has been increased 1.5 times with compare to the

last year.

Company’s FOH has also been increased 1.6 times with compare to the

last year.

This ratio is indicating that the increase in CGS is lower than the increase in

sales year after year which is not a good sign for the health of the company.


http://www.businessdictionary.com/definition/percentage.html

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http://www.investorwords.com/3626/pay.html


http://www.investorwords.com/4365/sales.html

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Return on asset

ROA. A measure of a company's profitability, equal to a fiscal year's earnings

divided by its total assets, expressed as a percentage. Return on assets (ROA)

reveals managements effectiveness in generating profits from the assets has available,

and is perhaps the single most important measure of return. This ratio of Packages

Limited Lahore for the year 2004 to 2008 is as under: -

2008 2007 2006 2005 2004 - 15.42% 35.58% 11.22% 14.79%

-

15.42%

35.58%

11.22%14.79%

-5

10152025303540

2004 2005 2006 2007 2008

Series1

This ratio measures how efficiently management is using its assets to generate

the sales. Higher the ratio is favorable indicator for the company and shows the

efficiency of assets utilization in generating income. This ratio after showing

slight decrease in 2005 has been increased highly in 2006 and afterward

decreasing continuously showing that the firm is not using its assts efficiently

and effectively.

The reason behind continuous decrease in this ratio is that the increase in

company’s average total asset is higher than the increase in net income. The

reasons behind abrupt decrease in this ratio is abrupt increase in Total assets in

the year 2007 are as under:-

Company has increased its fixed assets like property plan and

equipments in the year 2007 twice than the previous year.



http://www.investorwords.com/5975/total_assets.html

http://www.investorwords.com/1618/earnings.html

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http://www.investorwords.com/3881/profitability.html


http://www.investorwords.com/4313/ROA.html

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Company has increased its investment and makes investments in long

term assets.

However decrease in this ratio in 2008 is not caused by the increase in fixed

asset but the company has to face loss during this year due to current maturity

of long term debts and interest and finance charges. Over all this ratio is

indicating that the firm is not using its assets efficiently and effectively to

generate the income.

Return on Total Equity

A measure of how well a company used reinvested earnings to generate

additional earnings, equal to a fiscal year's after-tax income (after preferred

stock dividends but before common stock dividends) average total equity,

expressed as a percentage. It is used as a general indication of the company's

efficiency; in other words, how much profit it is able to generate given the

resources provided by its stockholders. Investors usually look for companies

with returns on equity that are high and growing. The return on total equity for


2008 2007 2006 2005 2004

-1.14% 27.17% 56.99% 17.02% 22.84%

-1.14%

27.17%

56.99%

17.02%22.84%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

2004 2005 2006 2007 2008

Series1


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http://www.investorwords.com/4217/resource.html

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http://www.businessdictionary.com/definition/word.html

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http://www.investorwords.com/4732/stock_dividend.html

http://www.investorwords.com/1509/dividend.html

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http://www.investorwords.com/2400/income.html

http://www.investorwords.com/147/after_tax.html




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The pattern shown in graphical representation is same like the return on asset

and net profit margin and profit before tax margin. The best figure is shown in

the year 2006 this is because of highest net income among all the years. After

2006 this ratio has been continuously decreased because company’s net income

continuously decreased due to the reasons mentioned above. In the year 2008

company has to face loss. The continuous decline after 2006 is also because of

company has raised more funds through equity by issuing new shares in the

year 2007 and 2008. However the decline in the ratio is not a good sign for the

health of the company. It is not a good indicator to encourage investors.

Return on common equity

A variation of the Return on Equity formula which subtracts preferred

dividends from net income and preferred equity from shareholders' equity. This

variation shows the effect of common shares on profitability.

This ratio of the company is same as above because the company has not even

a single preferred stock.

Return on investment

A measure of a corporation's profitability, equal to a fiscal year's income

divided by common stock and preferred stock equity plus long-term debt. ROI

measures how effectively the firm uses its capital to generate profit; the higher

the ROI, the better. More generally, the income that an investment provides in

a year. The ROI for Packages Limited Lahore for the year 2004 to 2008 is as under: -

2008 2007 2006 2005 2004

2.99% 18.19% 43.31% 17.56% 24.96%


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http://www.investorwords.com/2888/long_term_debt.html

http://www.investorwords.com/8177/plus.html



http://www.investorwords.com/986/common_stock.html

http://www.investorwords.com/2400/income.html



http://www.investorwords.com/1140/corporation.html



http://www.investorwords.com/5874/common_shares.html

http://www.investorwords.com/4529/shareholders_equity.html

http://www.investorwords.com/6887/preferred_equity.html

http://www.investorwords.com/3247/net_income.html

http://www.businessdictionary.com/definition/preferred-dividend.html

http://www.businessdictionary.com/definition/preferred-dividend.html

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http://www.investorwords.com/5228/variation.html

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2.99%

18.19%

43.31%

17.56%24.96%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

2004 2005 2006 2007 2008

Series1

The pattern of this ratio is just like most of the profitability ratios. The highest

figure is shown in 2006 due to the highest net income earned by the company

and one other reason is that the company has lower long term debts and equity

than all rest of the years. How ever the ratio is continuously decreased in next

year i.e. 2007 and 2008 due to the several reasons: -

The firm long term debts and equity has been increased 1.77 times and

2.08 times with compare to the 2006. In 2008 the increase in long term

debt and equity is 1.18 times to the year 2007.

Overall the ratio is not indicating the favorable sign for the company because

the company is not utilizing its investments efficiently and effectively to

generate profits.

Operating Asset Turnover

This ratio measure that how many times the firm has converted its operating assets

into sales. The higher the answer of the ratio reflects the efficiency of management

using its operating assets. Higher the answer of the ratio is the favorable sign for the

company. The operating asset turnover for Packages Limited Lahore for the year 2004

to 2008 is as under: -

2008 2007 2006 2005 2004



85 of 136


18.70

0.961.764.54

8.86

0.00

5.00

10.00

15.00

20.00

2004 2005 2006 2007 2008

Series1

This ratio after the continuous declining till 2007 has been sharply increased in

2008. Because the operating assets of the firm have been continuously

increased till 2007 but sales is not increase up to that extent. The increase in

operating asset is higher than the increase in sales. However in 2008 the

operating assets has been decrease but sales has been increased which shows

the efficiency of the management in using its current assets to generate the

sales. Except 2008 this ratio is indicating not a good sign for the help of the

company because the firm is unable to use its operating assets efficiently and

effectively with compare the past year.

Return on Operating Asset

This measure varies somewhat from the preceding return on assets employed,

because only those assets actively used to create revenue are used in the

denominator. This focuses management attention on the amount of assets

actually required to run the business, so that it has a theoretical targeted asset

level to achieve. A typical result of this measurement is an ongoing campaign

to eliminate unnecessary assets. The return on operating asset turnover for

Packages Limited Lahore for the year 2004 to 2008 is as follows: -

2008 2007 2006 2005 2004

62.04% 7.81% 20.65% 63.69% 129.22%


86 of 136


62.04%

7.81%20.65%

63.69%

129.22%

0.00%20.00%40.00%60.00%80.00%

100.00%120.00%140.00%

2004 2005 2006 2007 2008

Series1

This ratio after sharply declining till 2007 has been increased in 2008. The

reason behind sharp decline is that thought the operating assets of the firm have

been increase over the years but net income is not increase up to that extent.

The increase in operating asset is higher than the increase in net income.

However in 2007 operating asset increase 2.11 times but the net income of the

company has been decreased 1.25 times with compare to the previous year.

This indicate that the company is not using its operating assets efficiently and

effectively to generate the net income. However the increase in 2008 is because

of the decrease in operating assets due to the increase in current liabilities. Here

the decrease in operating asset is higher than the decrease in net income of the

company that is why the answer of this ratio is higher. This year is showing the

efficiency of the management that however the operating assets has been

decrease but management has used its operating assets more efficiently and

effectively with compare to the previous years. Overall this ratio is not

indicating the good sign for the company health because the company is unable

to use its assets efficiently and effectively to generate net income.

DuPont return on Total Asset

Return on Assets Duo Pont is a financial ratio that shows how the return on

assets depends on both asset turnover and profit margin. The Duo Pont method

breaks out these two components from the return on assets ratio in order to

determine the impact of each on the profitability of the company. The duo


http://en.wikipedia.org/wiki/Profit_(accounting)

http://en.wikipedia.org/wiki/Return_on_assets

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http://en.wikipedia.org/wiki/Assets

http://en.wikipedia.org/wiki/Financial_ratio

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DuPont return on total asset for Packages Limited Lahore for the year 2004 to 2008 is

as under: -

2008 2007 2006 2005 2004

-0.57% 15.42% 35.58% 11.22% 14.79%

-0.57%

15.42%

35.58%

11.22%14.79%

-5.00%0.00%5.00%

10.00%15.00%20.00%25.00%30.00%35.00%40.00%

2004 2005 2006 2007 2008

Series1

The pattern shown in graphical representation is same like the return on asset

and net profit margin, profit before tax margin and total asset turnover. The

best figure is shown in the year 2006 this is because of highest net income

among all the years. After 2006 this ratio has been continuously decreased

because company’s net income continuously decreased due to the reasons

mentioned above. In the year 2008 company has to face loss. This ratio like all

the profitability ratios is not showing the favorable indicator for the company.


88 of 136


D) Investor Ratios

Most of the investor ratios that we might need to use is relatively simple both

to use and to understand. We can contrast these ratios with others, such as stock

and debtors' turnover; and the relationships between the ROCE and the profit

margin and assets turnover ratios, at the top of the pyramid of ratios.

The basic ratios we are interested in are:

Financial Leverage

Earning Per Share

Price Earning Ratio

Book Value Per Share

Dividend Payout Ratio

Dividend Yield

Percentage of Earning Retained

Financial Leverage

This measure the use of interest as fixed charges to increase the income is

called financial leverage. The financial leverage for Packages Limited Lahore

for the year 2004 to 2008 is as under: -

2008 2007 2006 2005 2004

- 0.16 0.14 0.75 0.74


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-

0.160.14

0.750.74

-00001111

2004 2005 2006 2007 2008

Series1

This ratio sharply decline after 2006. This ratio is telling that the earnings are

not increase more than the earning before tax & interest just because of interest

as a fixed cost. The firm has to bear high interest rates and financing cost but

the increase in net income is not up to that extent. In year 2008 company has to

face loss just because of this interest rate and current maturity of long term

debt. Firm has paid high amount of interest rate in 2008. This ratio is not

indicating a good sign for the health of the company. The interest as a fixed

cost is not proved to be good tool to increase the income for the company.

Earning Per Share

Earning per share measure the cash flow towards the stock holders. It reflects

that how much income is generated by the company for its stockholders.

Higher the earning per share shows the positive sign for the company and cause

attraction to the investors in raising new capital if needed. The earning per

share for Packages Limited Lahore for the year 2004 to 2008 is given below: -

2008 2007 2006 2005 2004

- 58.96 87.30 14.53 20.14


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-

58.96

87.30

14.5320.14

-

20

40

60

80

100

2004 2005 2006 2007 2008

Series1

This ratio has been fluctuating over the years. Again 2006 are proven to be the

best year for the company in which it generate highest earning per share

because of the significance increase in the net income. The ratio tends to be

decline in next two years because of decrease in net income of the company

due to the several reasons already discussed. In the year 2008 this ratio tends to

be zero because company has to face loss. This ratio is not showing the good

sign for the company. This result will discourage the investors as the EPS is

declining.

Price Earning Ratio

P/E ratio is a useful indicator of what premium or discount investors are

prepared to pay or receive for the investment. The higher the price in relation to

earnings, the higher the P/E ratio which indicates the higher the premium an

investor is prepared to pay for the share. This occurs because the investor is

extremely confident of the potential growth and earnings of the share. This

ratio is also called earnings multiple. The earnings multiple for Packages

Limited Lahore for the year 2004 to 2008 is given as under: -

2008 2007 2006 2005 2004

- 7.10 2.34 12.44 10.15


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-

7.10

2.34

12.44

10.15

-2468

101214

2004 2005 2006 2007 2008

Series1

This ratio over the year has been fluctuating increasing and than decreasing

trend. High P/E generally reflects lower risk and/or higher growth prospects for

earnings. The above ratio shows that the shares were traded at a much higher

premium in 2005 than were in 2006. In 2005 the price was 12.44 times higher

than earnings while in 2006, the price was only 2.34 times higher than its

earning. In 2008 this ratio is decrease to the zero because of zero earning per

share. This ratio is also not showing the good sign for the company’s health.

The investor will also not consider it good.

Book Value per Share

A figure frequently publish in the annual reports is book value per share, which

indicates the amount of stockholders equity that relates to each share of

outstanding common stock. The book value per share for Packages Limited Lahore


2008 2007 2006 2005 2004

192.85 247.65 195.66 110.71 88.18


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192.85

247.65

195.66

110.7188.18

0.00

50.00

100.00

150.00

200.00

250.00

300.00

2004 2005 2006 2007 2008

Series1

This ratio of the company started increasing and increase till 2007 but in the

year 2008 it decline. The reasons for increase in ratio till 2007 are the

continuous increase in the equity of the company and the no of common stock

outstanding till 2007. The reasons behind declining this ratio in 2008 are: -

Company’s total equity has been declined due to the inappropriate loss

faced by the company during the year 2008.

Company’s total no of common stock has also been increased in 2008.

This ratio has been remained a positive indicator for the company till 2007 but

in 2008 it is not indicating a good sign for the health of the company because

this ratio is started declining in 2008.

Dividend Payout Ratio

This ratio looks at the dividend payment in relation to net income Dividends

paid divided by company earnings over some period of time, expressed as a

percentage. This ratio is also called payout ratio. The dividend payout ratio for

Packages Limited Lahore for the year 2004 to 2008 is given as under: -

2008 2007 2006 2005 2004

- 11.12% 6.85% 35.47% 43.25%


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-

11.12%6.85%

35.47%

43.25%

-

10.0

20.0

30.0

40.0

50.0

2004 2005 2006 2007 2008

Series1

This ratio year after year has been declining showing that the company is distributing

lower proportion of its earning as dividend. In 2007 this ratio increase with compare

to previous year 2006 but this ratio is zero in the year 2008 as company has faced loss

and earning per share is zero in this year generally, the low growth companies have

higher dividends payouts and high growth companies have lower dividend payouts.

This ratio is showing positive indicator for the company as it seems to be that the

company is growing gradually. On the other hand with respect to the investors this

ratio has two impacts.

The investor who is interest in the high dividend will consider it bad because

the dividend is decreasing year by year.

While on the other hand the investor who are interested in the higher capital

gains will consider good

Dividend Yield

The yield a company pays out to its shareholders in the form of dividends. It is

calculated by taking the amount of dividends paid per share over the course of

a year and dividing by the stock's price. Mature, well-established companies

tend to have higher dividend yields, while young, growth-oriented companies

tend to have lower ones, and most small growing companies don't have a

dividend yield at all because they don't pay out dividends. The dividend yield for



http://www.investorwords.com/3626/pay.html

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2008 2007 2006 2005 2004

- 1.57% 2.93% 2.85% 4.26%

-

1.57%

2.93%2.85%

4.26%

-

1

2

3

4

5

2004 2005 2006 2007 2008

Series1

This ratio has been declining year after year except 2006 because in this year

there is a slight increase in this ratio because of increase in dividend per share

to the stockholders. However after 2006 there is continuous decline in this

ratio. The decrease in this ratio in 2007 is due to the following reasons: -

There is increase in the market price per share of the company i.e. 1.78

times of the previous year.

Secondly, the dividend rather than increasing has been decreasing with

compare to the previous year.

In the year 2008 however the market price per share has been decreased 4.5

times to the previous year but the company has face loss so the dividend is zero

due to which this ratio is zero.

This ratio is also not indicating the favorable sign for the company because the

market price per share has been decreased abruptly in the last analyzed year.

Percentage of Earning Retained

The proportion of current earnings retained for internal growth. The percentage of

earning retained s better for trend analysis if nonrecurring items are removed. This

indicates what is being retained of recurring earning. The percentage of earning

retained of Packages Limited Lahore for the year 2004 to 2008 is as under: -

2008 2007 2006 2005 2004


95 of 136


- 90.33% 93.15% 60.36% 57.91%

-

90.33%93.15%

60.36%57.91%

-

20

40

60

80

100

2004 2005 2006 2007 2008

Series1

This ratio has been continuously increased till 2006 because of continuous

increase in the net income and than started decline till the last year however

company’s dividend has been slightly increasing year after year. The ratio has

been decreased because in 2007 company’s net income decreased almost 1.5

times and the reason for an abrupt decrease in 2008 the company has to face

loss due to which company is unable to keep retained earnings. This ratio was

favorable indicator for the company till 2007 but after that this is not showing

the positive indicator of the company.


96 of 136


E) Long Term Analysis

Time Interest Earned Ratio

Debt Service Coverage Ratio


Debt Ratio

Debt Equity Ratio

Fixed Asset Coverage

Time Interest Earned Ratio

The interest coverage ratio tells us how easily a company is able to pay interest

expenses associated to the debt they currently have. The ratio is designed to

understand the amount of interest due as a function of company’s earnings

before interest and taxes (EBIT). This ratio measures the extent to which

operating income can decline before the firm is unable to meet its annual

interest cost. The time interest earned ratio for Packages Limited Lahore for the year

2004 to 2008 is as under: -

2008 2007 2006 2005 2004

0.24 2.00 11.64 5.37 6.28

0.242.00

11.64

5.376.28

0.002.004.006.008.00

10.0012.0014.00

2004 2005 2006 2007 2008

Series1


97 of 136


This ratio over the year has been showing fluctuating trend. The highest figure

is again in the year 2006, because the interest expense of the company has been

decreased 2.35 times to the previous year. After 2006 there is continuous

decline in this ratio because of multiple reasons i.e.: -

There is continuous decrease in company’s EBIT i.e. 1.25 and 1.80

times in 2007 and 2008 respectively.

On the other hand company’s interest expenses are continuously

increasing due to the increase in the long term debts.

In the year 2008 company has to pay huge amount of markup and has to bear

high finance cost and bank charges in paying this markup. Overall the ratio is

not indicating a favorable sign for the company because the net income is

decreasing and on the other hand interest expenses of the company are

increasing by the increase in use of debt.

Debt Service Coverage Ratio

A measurement of a property's ability to generate enough revenue to cover the

cost of its mortgage payments. It is calculated by dividing the net operating

income by the total debt service. For example, a property with a net operating

income of $50,000 and a total debt service of $40,000 would have a debt

service ratio of 1.25, meaning that it generates 25% more revenue than required

to cover its debt payment. The debt service coverage ratio for Packages

Limited Lahore for the year 2004 to 2008 is as under: -

2008 2007 2006 2005 2004

0.18 2.00 11.64 5.37 6.28


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0.182.00

11.64

5.376.28

0.002.004.006.008.00

10.0012.0014.00

2004 2005 2006 2007 2008

Series1

This ratio over the year has been showing fluctuating trend. The highest figure

is again in the year 2006, because the interest expense of the company has been

decreased 2.35 times to the previous year. After 2006 there is continuous

decline in this ratio because of multiple reasons i.e.: -

There is continuous decrease in company’s EBIT i.e. 1.25 and 1.80

times in 2007 and 2008 respectively.

On the other hand company’s interest expenses are continuously

increasing due to the increase in the long term debts and company has to

bear financing cost etc.

In 2008 the company has to pay the huge amount of current maturity of

long term debts i.e. Rs: 550 Million.

Overall the ratio is not indicating a favorable sign for the company because the

net income is decreasing and on the other hand interest expenses of the

company are increasing by the increase in use of debt.


Profits before income taxes and interest payments, divided by long-term

interest, for a given period of time. The fixed charge coverage ratio for Packages

Limited Lahore for the year 2004 to 2008 is as below: -

2008 2007 2006 2005 2004

0.18 2.00 11.64 5.37 6.28


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0.182.00

11.64

5.376.28

0.002.004.006.008.00

10.0012.0014.00

2004 2005 2006 2007 2008

Series1

This ratio is same as above because the company’s rentals amount on long term

debts is zero.

Debt Ratio

This will tell you how much the company relies on debt to finance assets.

When calculating this ratio, it is conventional to consider both current and non-

current debt and assets. In general, the lower the company's reliance on debt for

asset formation, the less risky the company is since excessive debt can lead to a

very heavy interest and principal repayment burden. However, when a

company chooses to forgo debt and rely largely on equity, they are also giving

up the tax reduction effect of interest payments. Thus, a company will have to

consider both risk and tax issues when deciding on an optimal debt ratio. The

debt ratio for Packages Limited Lahore for the year 2004 to 2008 is as under: -

2008 2007 2006 2005 2004

53.55% 45.66% 39.70% 33.43% 35.26%


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53.55%45.66%

39.70%33.43%35.26%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

2004 2005 2006 2007 2008

Series1

This ratio of the company has been continuously increasing year by year except

in 2006 there is a slight decrease in this ratio because the increase in firm’s

total asset in higher than the increase in firm’s liability. The continuous

increase in this ratio is because year after year the percentage of increase in

debt is higher than the percentage of increase in assets.

This ratio is not a good sign for the company because company is mostly

relying on short term and long term debt as a source of funding due to which

company has to bear high cost of markup and arranging finance cost.

Debt Equity Ratio

This ratio indicates what proportion of equity and debt the company is using to

finance its assets. A high debt/equity ratio generally means that a company has

been aggressive in financing its growth with debt. This can result in volatile

earnings as a result of the additional interest expense.

If a lot of debt is used to finance increased operations (high debt to equity), the

company could potentially generate more earnings than it would have without

this outside financing. If this were to increase earnings by a greater amount

than the debt cost (interest), then the shareholders benefit as more earnings are

being spread among the same amount of shareholders. However, the cost of

this debt financing may outweigh the return that the company generates on the

debt through investment and business activities and become too much for the

company to handle. This can lead to bankruptcy, which would leave

shareholders with nothing. The debt to equity ratio for Packages Limited Lahore



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2008 2007 2006 2005 2004

43.06% 40.46% 30.50% 11.46% 0.15%

43.06%40.46%

30.50%

11.46%

0.15%0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

2003 2004 2005 2006 2007 2008 2009

Series1

This ratio of the company has been continuously increasing year by year

because year after year company’s is relying more in debt as a source of

funding rather than equity. This ratio is not a good sign for the company

because company is mostly relying on short term and long term debt as a

source of funding due to which company has to bear high cost of markup and

arranging finance cost.

Fixed Asset Coverage

The Fixed average coverage ratio is an indicator of how efficiently the

resources and facilities of a firm (the fixed assets) are being utilized by

equating them with the amount generated through sales. For a greater value the

ratio indicates a satisfactory performance of the organization's operations and a

lower value of the ratio indicates poor performance. This ratio expresses the

number to times the fixed assets are being turned over in a stated period and it

accounts critically the efficiency with which the assets are being employed. The

fixed asset coverage for Packages Limited Lahore for the year 2004 to 2008 is as

below: -

2008 2007 2006 2005 2004

2.26 1.47 2.21 6.28 518.74


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2.261.472.216.28

518.74

0.00

100.00

200.00

300.00

400.00

500.00

600.00

2004 2005 2006 2007 2008

Series1

This ratio of the company has sharply decreased after 2006 and fluctuates year

after year. Actually in 2006 the amount of debt is so smaller with compare to

the amount of assets. After 2006 company has increase the use of debt as a

source of funding and this ratio sharply declined. This ratio is showing the

strength of the company the company’s debt paying ability because the

company has more assets than its debt amount.


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104 of 136


CONCLUSION Microsoft is one of the leading manufacturing company in General

Industrial sectors of Pakistan remains on top among other competitors. .

From the above study we conclude that Packages Limited Lahore due

to the addition in business units year to year and new product has been

launched by the company the sales of the company is increasing sharply. But

along with the increase in sales CGS has also been increased with higher rate

than sales, which is not favorable for the company. Operating expenses of the

company has been increasing year after year. Operating profit of the company

was increased till 2006 but after that there is a sharp declined due to increase in

CGS which is not good for the company. There is increase in interest expense

and financial cost of the company year after year because the firm has been

increasing the use of debts as a source of funding rather than equity. Net

income of the company was increasing till 2006 but after that it has also been

decreased due to the reasons already discussed in detail.

Company has increased its Current assets, non current assets and net fixed

asses year after year but these assets have not been utilized properly efficiently

and effectively by the company except in the year 2006. Company’s liabilities

have been increased with the passage of time especially long term debts have

been increased with the high percentage year after year. There is also

increasing trend in the company’s equity except 2009 because of

unappropriated loss. The financial conditions of the company after carefully

analyzing its financially statements with the help of ratio analysis is as under: -

The firm’s activities are not showing the favorable situation for the company.

Firm’s turnover of various items e.g. Account receivable, inventory, working

capital and current asset, fixed asset and ultimately total asset was increased

till 2006 but after that these are declined sharply and same is the case with


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days of inventory, aging of accounts receivables showing the inefficiency of

the management of utilization of these assets in generating earnings for the

company.

The liquidity position of the company was stronger till 2007 but in 2008

it shows the worse condition for the company due to the increase in

firm’s liabilities with high percentages than liquidate able assets.

The profitability situation of the company was going favorable for the

company till 2006 but after that the situation is not in the favor of the

company as the profits are declining even company has to face loss in

2008 due to various reasons discussed in detail.

From the investors points of view the company was very attractive till

2007 as dividend was increasing price of the share was also increasing

but after that there is dividend, market price, earning per share has been

declined which is not favorable situation for the company.

The firm’s long term debt paying ability is showing different variations

in these five years. The debt paying ability is of the company is

increasing year after year because of increase in firms net fixed assets.

We may conclude that the current financial position of the company is not well.

The year 2006 has been proved a golden year for the company but after that year

the financial conditions of the company are wakening with the passage of time

which is not a favorable indicator for the health of the company.


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SUGGESTIONSFinancial statements are most significant part of a company because

financial statement analysis involves a comparison of a firm’s performance

with its past performance and with the copmetitors in the industry. The

analysis is used to determine the firm’s financial position so as to identify

its current strength and weakness and to suggest actions the firm might

pursue to take advantage of the strengths and correct any weakness. Here is

our recommendations about this company are as follows:

Our evaluations of the acid test ratio suggest that Packages Limited

Lahore has liquidity position currently is poor. Packages’s acid test ratio

seems inadequate.

The average selling time of inventories in 2006 is 103 days and in 2008

it is 120 days. So their turn over rate is very high in the company, which

is harmful for the country. So they should need to maintain the standard.

The Earning per Share of Packages Limited Lahore in 2006, 2007 and

2008 is 87.30, 58.96 and 0 respectively which is decreasing year by year

is not good for the company and they should try to increase the level of

the earning per share.

Our assessment of the time interest earned ratio suggests that Packages

earned ratio is decreasing after 2007 which is not good sign they should

try to decrease the interest expense by low usage of debt as debt is not a

good tool for the company to generate earnings.

The company should carefully examine its inventory to sales process.

There is need of improvement in this process. The company should try

to decrease the time period of this process.

Our judgment of dividend per share suggests that Packages Ltd should

try to increase its dividend per share.

The company should control its production costs. He should try to

decrease its material cost.


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The company should decrease use of debts and go for equity funding

because firm has to bear high costs of debts.

The company should improve its assets utilization. Assets should be

utilized efficiently and effectively to generate the profit.

After carefully analyzing the company should remove its non

operational assets by selling them.


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BIBLIOGRAPHY

ANNUAL REPORTS OF PACKAGES LIMITED LAHORE

WWW.PACKAGES.COM.PK

WWW.GOOGLE.COM

WWW.WIKIPEDIA.COM

WWW.ANSWER.COM

WWW.ACCOUNTING TOOLS.COM

WWW.INVESTORWORDS.COM

WWW.BUISNESSDIRECTORY.COM

WWW.INVESTOPEDIA.COM

BOOK OF FINANCIALY STATEMENT ANALYSISBY CHARLOS

H GIBSON

BOOK OF FINANCIAL MANAGEMENT


http://WWW.INVESTORWORDS.COM/

http://WWW.ANSWER.COM/

109 of 136



110 of 136


PACKAGES LIMITEDSummarized Balance SheetAs at December 31, ____________

ASSETS RS IN THOUSANDS2008 2007 2006 2005 2004

CURRENT ASSETSCash and bank balances 199,188 101,022 106,703 2,019,950 144,886

Investment - - - - 9,067

Trade Debts 1,523,049 1,288,928 821,160 784,638 640,537

Stock in TradeRaw material 2,133,360 1,461,641 1,023,695 647,090 632,259

Work in process 205,551 117,400 97,561 80,980 77,127

Finished goods 1,313,350 627,150 525,917 415,973 384,943

Store and spare 841,487 715,840 485,665 407,439 380,556

Total Stock in Trade 4,493,748 2,922,031 2,132,838 1,551,482 1,474,885Loans, advances, deposits, prepayments and other receivables

692,076 525,421 353,521 202,667 155,442

Other Current Assets 15,400 - - - -

Total Current Assets 6,923,461 4,837,402 3,414,222 4,558,737 2,424,817NON-CURRENT ASSETSInvestment - 10,080,259 5,775,665 693,576 691,176

Long-term loans and deposits 155,102 244,166 180,618 16,200 5,840

Intangible assets 241 363 2,532 5,300 6,385

Retirement benefits 127,518 88,262 69,805 60,291 51,725

Total NON Current Assets 282,861 10,413,050 6,028,620 775,367 755,126FIXED ASSETSFixed Assets at cost 17,509,880 15,765,666 7,946,165 7,521,193 7,110,625Less: Accumulated Depreciation (6199293) (5378358) (4860627) (4508991) (4158104)

Book Value 11,310,587 10,387,308 3,085,538 3,012,202 2,952,521Add: Capital work-in-progress 8,362,485 7,800,683 10,143,195 3,265,517 329,867

Assets subject to finance lease 8,155,239 - 1,901 8,581 12,155

Total Fix Assets 27,828,311 18,187,991 13,230,634 6,286,300 3,294,543

TOTAL ASSETS 35,034,633 33,438,443 22,673,476 11,620,404 6,474,486LIABILITIESCURRENT LIABILITIESFinance under markup arrangement -secured 2,587,819 401,019 1,280,857 1,602,720 234,197

Trade Creditor 290,551 300,952 - - -


ANNEXURE - I

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Other Payable 1,171,353 1,263,410 - - -Creditor, Accrued and other liability - - 1,030,516 619,215 601,173

Current maturity of long term finances-secured 550,000 - - - -

Current portion for liabilities against assets subject to finance lease

- - 851 5,159 859,330

Provision for taxation - - - 17,777 54,185

Other Current liabilities 1,017,150 - - 90,959 -

Total Current liabilities 5,616,873 1,965,381 2,312,224 2,335,830 1,748,885NON-CURRENT LIABILITIESDeferred liabilities 840,788 955,790 688,455 547,468 527,390

Total Non-Current Liabilities 840,788 955,790 688,455 547,468 527,390LONG TERM DEBTLong-term finances - secured 12,304,400 12,346,500 6,000,000 1,000,000 -

Liabilities against assets subject to finance lease - - - 851 6,351

Total Long Term Debts 12,304,400 12,346,500 6,000,000 1,000,851 6,351Total liabilities 18,762,061 15,267,671 9,000,679 3,884,149 2,282,626

EQUITYPaid up Capital 843,795 733,735 698,795 698,795 475,371

Reserves 15,624,602 13,110,240 6,872,336 6,021,297 2,752,625

Un-appropriated (loss) / profit (195825) 4,326,797 6,101,666 1,016,163 963,864

Total Equity 16,272,572 18,170,772 13,672,797 7,736,255 4,191,860TOTAL LIABILITIES & EQUITY 35,034,633 33,438,443 22,673,476 11,620,404 6,474,486


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PACKAGES LIMITED

Summarized Income StatementFor the year Ended on Dec 31, _____

RS IN THOUSANDS 2008 2007 2006 2005 2004Net Sales 12,224,779 9,028,635 7,846,599 7,098,765 5,986,977

Cost of Production

Raw matrial 7,639,296 5,108,396 4,246,956 3,520,644 2,710,306

Labor and Wages 681,050 533,893 469,680 427,139 412,247

Depriciation 858,377 529,558 348,173 375,573 397,330

FOH 2,877,108 1,778,587 1,613,711 1,457,313 1,280,754

Work in process adjustment (+,-) (88151) (19839) (16581) (3853) (11506)

Total Cost of Production 11,967,680 7,930,595 6,661,939 5,776,816 4,789,131

Inventory Adjustments (+,-) (686200) (101233) (109944) (31030) (110756)

Cost of Goods Sold 11,281,480 7,829,362 6,551,995 5,745,786 4,678,375

Gross Profit 943,299 1,199,273 1,294,604 1,352,979 1,308,602

Operating Expenses General and Administrative expenses (512189) (348064) (349934) (346565) (347030)

selling expenses (25460) (118172) (26418) (10632) (88163)

Total Operating Expenses (537,649) (466,236)

(376,352)

(357,197) (435,193)

Operating Profit 405,650 733,037 918,252 995,782 873,409

Other Income/expenses 948,879 4,412,728 5,721,972 613,047 536,919

Financial Cost or interest expenses (1662094) (367378) (78909) (185529) (139008)

Total Finanicial Cost and Other expenses/Income (713,215) 4,045,350 5,643,063 427,518 397,911

Profit before Tax and work fund (307,565) 4,778,387 6,561,315 1,423,300 1,271,320

Work fund (324) (145439) (213475) (93375) (84699)

Profit before Tax (307,889) 4,632,948 6,347,840 1,329,925 1,186,621

Tax (112064) (307000) (247060) (314561) (229119)

Net Profit After Tax (195,825) 4,325,948 6,100,780 1,015,364 957,502


ANNEXURE - II

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PACKAGES LIMITED

Horizontal Analysis of Income StatementFor the year Ended on Dec 31, _____

RS IN THOUSANDS

2008 2007 2006 2005 2004Net Sales 156% 115% 100% 90% 76%

Cost of Production

Raw matrial 180% 120% 100% 83% 64%

Labor and Wages 145% 114% 100% 91% 88%

Depriciation 247% 152% 100% 108% 114%

FOH 178% 110% 100% 90% 79%

Work in process adjustment (+,-) 532% 120% 100% 23% 69%

Total Cost of Production 180% 119% 100% 87% 72%

Inventory Adjustments (+,-) 624% 92% 100% 28% 101%

Cost of Goods Sold 172% 119% 100% 88% 71%

Gross Profit 73% 93% 100% 105% 101%

Operating Expenses

General and Administrative expenses 146% 99% 100% 99% 99%

selling expenses 96% 447% 100% 40% 334%

Total Operating Expenses 143% 124% 100% 95% 116%

Operating Profit 44% 80% 100% 108% 95%

Other Income/expensess 17% 77% 100% 11% 9%

Financial Cost or interest expenses 2106% 466% 100% 235% 176%

Total Finanicial Cost and Other expenses/Income -13% 72% 100% 8% 7%

Profit before Tax and work fund -5% 73% 100% 22% 19%

work fund 0% 68% 100% 44% 40%

Profit before Tax -5% 73% 100% 21% 19%

Tax 45% 124% 100% 127% 93%

Net Profit After Tax -3% 71% 100% 17% 16%


ANNEXURE - III

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PACKAGES LIMITED

Vertical Analysis of Income StatementFor the year Ended on Dec 31, _____

RS IN THOUSANDS

2008 2007 2006 2005 2004Net Sales 100% 100% 100% 100% 100%

Cost of Production

Raw matrial 62.5% 56.6% 54.1% 49.6% 45.3%

Labor and Wages 5.6% 5.9% 6.0% 6.0% 6.9%

Depriciation 7.0% 5.9% 4.4% 5.3% 6.6%

FOH 23.5% 19.7% 20.6% 20.5% 21.4%

Work in process adjustment (+,-) 0.7% 0.2% 0.2% 0.1% 0.2%

Total Cost of Production 97.9% 87.8% 84.9% 81.4% 80.0%

Inventory Adjustments (+,-) 5.6% 1.1% 1.4% 0.4% 1.8%

Cost of Goods Sold 92.3% 89.0% 86.3% 81.8% 81.8%

Gross Profit 7.7% 11.0% 13.7% 18.2% 18.2%

Operating Expenses

General and Administrative expenses 4.2% 3.9% 4.5% 4.9% 5.8%

selling expenses 0.2% 1.3% 0.3% 0.1% 1.5%

Total Operating Expenses 4.4% 5.2% 4.8% 5.0% 7.3%

Operating Profit 3.3% 8.1% 11.7% 14.0% 14.6%

Other Income/expensess 7.8% 48.9% 72.9% 8.6% 9.0%

Financial Cost or interest expenses 13.6% 4.1% 1.0% 2.6% 2.3%

Total Finanicial Cost and Other expenses/Income -5.8% 44.8% 71.9% 6.0% 6.6%

Profit before Tax and work fund -2.5% 52.9% 83.6% 20.0% 21.2%

work fund 0.0% 1.6% 2.7% 1.3% 1.4%

Profit before Tax -2.5% 54.5% 86.3% 21.4% 22.6%

Tax 0.9% 3.4% 3.1% 4.4% 3.8%

Net Profit After Tax -1.6% 47.9% 77.8% 14.3% 16.0%


ANNEXURE - IV

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PACKAGES LIMITEDHorizontal Analysis of Balance Sheet

As at December 31, ____________ASSETS RS IN THOUSANDS 2008 2007 2006 2005 2004CURRENT ASSETS

Cash and bank balances 197.17% 94.68% 5.28% 1394.17% 100%

Investment 0.00% 0.00% 0.00% 0.00% 100%

Trade Debts 118.16% 156.96% 104.65% 122.50% 100%

Stock in Trade

Raw matrial 145.96% 142.78% 158.20% 102.35% 100%

Work in process 175.09% 120.33% 120.48% 105.00% 100%

Finished goods 209.42% 119.25% 126.43% 108.06% 100%

Total Stock in Trade 165.55% 133.94% 143.98% 104.54% 100%Store and spare 117.55% 147.39% 119.20% 107.06% 100%

Loans, advances, deposits, prepayments and other receivables

131.72% 148.63% 174.43% 130.38% 100%

Other Current Assets 0.00% 0.00% 0.00% 0.00% 0%

Total Current Assets 143.12% 141.68% 74.89% 188.00% 100%NON-CURRENT ASSETS Investment 0.00% 174.53% 832.74% 100.35% 100%

Long-term loans and deposits 63.52% 135.18% 1114.93% 277.40% 100%

Intangible assets 66.39% 14.34% 47.77% 83.01% 100%

Retirement benefits 144.48% 126.44% 115.78% 116.56% 100%

Total NON Current Assets 2.72% 172.73% 777.52% 102.68% 100%FIXED ASSETS

Fixed Assets at cost 111.06% 198.41% 105.65% 105.77% 100%

Less: Accumulated Depriciation 115.26% 110.65% 107.80% 108.44% 100%

Book Value 108.89% 336.64% 102.43% 102.02% 100%Add: Capital work-in-progress 107.20% 76.91% 310.62% 989.95% 100%

Assets subject to finance lease 0.00% 0.00% 22.15% 70.60% 100%

Total Fix Assets 153.00% 137.47% 210.47% 190.81% 100%

TOTAL ASSETS 104.77% 147.48% 195.12% 179.48% 100%

LIABILITIES

CURRENT LIABILITIES

Finance under markup arrangment -secured

645.31% 31.31% 79.92% 684.35% 100%

Trade Creditor 96.54% 0.00% 0.00% 0.00% 0%

Other Payable 92.71% 0.00% 0.00% 0.00% 0%Creditor,Accured and other liability 0.00% 0.00% 166.42% 103.00% 100%

Current maturityof long term finances-secured

0.00% 0.00% 0.00% 0.00% 0%


ANNEXURE - V

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Current portion for liabilites against assets subject to finance lease

0.00% 0.00% 16.50% 0.60% 100%

Provision for taxation 0.00% 0.00% 0.00% 32.81% 100%

Other Current liabilities 0.00% 0.00% 0.00% 0.00% 0%

Total Current liabilities 285.79% 85.00% 98.99% 133.56% 100%

NON-CURRENT LIABILITIES

Deferred liabilities 87.97% 138.83% 125.75% 103.81% 100%

Total Non-Current Liabilities 87.97% 138.83% 125.75% 103.81% 100%LONG TERM DEBT

Long-term finances - secured 99.66% 205.78% 600.00% 0.00% 0%

Liabilities against assets subject to finance lease

- - 0.00% 13.40% 100%

Total Long Term Debts 99.66% 205.78% 599.49% 15758.95% 100%

Total liabilities 122.89% 169.63% 231.73% 170.16% 100%

EQUITY

Paid up Capital 115.00% 105.00% 100.00% 147.00% 100%

Reserves 119.18% 190.77% 114.13% 218.75% 100%

Unappropriated (loss) / profit -4.53% 70.91% 600.46% 105.43% 100%

Total Equity 89.55% 132.90% 176.74% 184.55% 100%TOTAL LIABILITIES & EQUITY 104.77% 147.48% 195.12% 179.48% 100%


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PACKAGES LIMITEDVertical Analysis of Balance Sheet

As at December 31, ____________ASSETS RS IN THOUSANDS 2008 2007 2006 2005 2004CURRENT ASSETS

Cash and bank balances 0.57% 0.30% 0.47% 17.38% 2.24%

Investment 0.00% 0.0% 0.0% 0.0% 0.1%

Trade Debts 4.35% 3.9% 3.6% 6.8% 9.9%

Stock in Trade

Raw matrial 6.09% 4.4% 4.5% 5.6% 9.8%

Work in process 0.59% 0.4% 0.4% 0.7% 1.2%

Finished goods 3.75% 1.9% 2.3% 3.6% 5.9%

Total Stock in Trade 10.42% 6.6% 7.3% 9.8% 16.9%Store and spare 2.40% 2.1% 2.1% 3.5% 5.9%

Loans, advances, deposits, prepayments and other receivables

1.98% 1.6% 1.6% 1.7% 2.4%

Other Current Assets 0.04% 0.0% 0.0% 0.0% 0.0%

Total Current Assets 19.76% 14.5% 15.1% 39.2% 37.5%NON-CURRENT ASSETS Investment 0.00% 30.15% 25.47% 5.97% 10.68%

Long-term loans and deposits 0.44% 0.73% 0.80% 0.14% 0.09%

Intangible assets 0.00% 0.00% 0.01% 0.05% 0.10%

Retirement benefits 0.36% 0.26% 0.31% 0.52% 0.80%

Total NON Current Assets

0 % 31.14% 26.59% 6.67% 11.66%

FIXED ASSETS

Fixed Assets at cost 49.98% 47.15% 35.05% 64.72% 109.83%

Less: Accumulated Depriciation 17.69% 16.08% 21.44% 38.80% 64.22%

Book Value 32.28% 31.06% 13.61% 25.92% 45.60%Add: Capital work-in-progress 23.87% 23.33% 44.74% 28.10% 5.09%

Assets subject to finance lease 23.28% 0.00% 0.01% 0.07% 0.19%

Total Fix Assets 79.43% 54.39% 58.35% 54.10% 50.89%

TOTAL ASSETS 100.00% 100.00% 100.00% 100.00% 100.00%

LIABILITIES

CURRENT LIABILITIES

Finance under markup arrangment -secured

7.39% 1.20% 5.65% 13.79% 3.62%

Trade Creditor 0.83% 0.90% 0.00% 0.00% 0.00%

Other Payable 3.34% 3.78% 0.00% 0.00% 0.00%Creditor,Accured and other liability 0.00% 0.00% 4.55% 5.33% 9.29%


ANNEXURE - VI

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Current maturityof long term finances-secured

1.57% 0.00% 0.00% 0.00% 0.00%

Current portion for liabilites against assets subject to finance lease

0.00% 0.00% 0.00% 0.04% 13.27%

Provision for taxation 0.00% 0.00% 0.00% 0.15% 0.84%

Other Current liabilities 2.90% 0.00% 0.00% 0.78% 0.00%

Total Current liabilities 16.03% 5.88% 10.20% 20.10% 27.01%

NON-CURRENT LIABILITIES

Deferred liabilities 2.40% 2.86% 3.04% 4.71% 8.15%

Total Non-Current Liabilities 2.40% 2.86% 3.04% 4.71% 8.15%LONG TERM DEBT

Long-term finances - secured 35.12% 36.92% 26.46% 8.61% 0.00%

Liabilities against assets subject to finance lease

0.00% 0.00% 0.00% 0.01% 0.10%

Total Long Term Debts 35.12% 36.92% 26.46% 8.61% 0.10%

Total liabilities 53.55% 45.66% 39.70% 33.43% 35.26%

EQUITY

Paid up Capital 2.41% 2.19% 3.08% 6.01% 7.34%

Reserves 44.60% 39.21% 30.31% 51.82% 42.51%

Unappropriated (loss) / profit -0.56% 12.94% 26.91% 8.74% 14.89%

Total Equity 46.45% 54.34% 60.30% 66.57% 64.74%TOTAL LIABILITIES & EQUITY 100.00% 100.00% 100.00% 100.00% 100.00%


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ACTIVITY RATIOS:

1) Account Receivable Turnover

2) Aging of A/R

3) Inventory Turnover

4) Days Sales in Inventory

5) Working Capital Turnover

6) Currents Assets turnover

7) Fixed Asset Turnover

8) Total Assets Turnover

1) Account Receivable Turnover

Net Sales

Avg. Trade Receivables

Years 2008 2007 2006 2005 2004

Net Sales 12,224,779,000 9,028,635,000 7,846,599,000 7,098,765,000 5,986,977,000

Avg. Trade Receivables 1,405,988,500 1,055,044,000 802,899,000 712,587,500 640,537,000

2008 2007 2006 2005 2004

8.69 8.56 9.77 9.96 9.35

2) Aging of Account Receivables

Average Gross Receivables

Net Sale/365

Years 2008 2007 2006 2005 2004Average Gross

Receivables 1,405,988,500 1,055,044,000 802,899,000 712,587,500 640,537,000

Net Sales 12,224,779,000 9,028,635,000 7,846,599,000 7,098,765,000 5,986,977,000


ANNEXURE - VII

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2008 2007 2006 2005 2004

41.98 42.65 37.35 36.64 39.05

3) Inventory Turnover

Cost of Good Sold

Average Inventory

Years 2008 2007 2006 2005 2004Cost of Good

Sold 11,281,480,000 7,829,362,000 6,551,995,000 5,745,786,000 4,678,375,000

Average Inventory 3,707,889,500 2,527,434,500 1,842,160,000 1,513,183,500 1,474,885,000

2008 2007 2006 2005 2004

3.04 3.10 3.56 3.80 3.17

4) Days Sales in Inventory

Avg. Inventory

C.G.S/365

Years 2008 2007 2006 2005 2004

Avg. Inventory 3,707,889,500 2,527,434,500 1,842,160,000 1,513,183,500 1,474,885,000

C.G.S 11,281,480,000 7,829,362,000 6,551,995,000 5,745,786,000 4,678,375,000

2008 2007 2006 2005 2004

120 118 103 96 115


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5) Working capital turnover

Net Sales

Working Capital

Years 2008 2007 2006 2005 2004

Net Sales 12,224,779,000 9,028,635,000 7,846,599,000 7,098,765,000 5,986,977,000

Working Capital 1,306,588,000 2,872,021,000 1,101,998,000 2,222,907,000 675,932,000

2008 2007 2006 2005 2004

9.36 3.14 7.12 3.19 8.86

6) Current Asset TurnoverC.G.S + Operating Expenses + Tax

Current Asset

Years 2008 2007 2006 2005 2004

C.G.S 11,281,480,000 7,829,362,000 6,551,995,000 5,745,786,000 4,678,375,000

Operating Expenses 537,649,000 466,236,000 376,352,000 357,197,000 435,193,000

Tax 112,064,000 307,000,000 247,060,000 314,561,000 229,119,000

Current Asset 6,923,461,000 4,837,402,000 3,414,222,000 4,558,737,000 2,424,817,000

2008 2007 2006 2005 2004

1.72 1.78 2.10 1.41 2.20


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7) Fix Asset Turnover

Net Sales

Avg. Fixed Assets

Years 2008 2007 2006 2005 2004

Net Sales 12,224,779,000 9,028,635,000 7,846,599,000 7,098,765,000 5,986,977,000

Avg. Fixed Assets 23,008,151,000 15,709,312,500 9,758,467,000 4,790,421,500 3,294,543,000

2008 2007 2006 2005 2004

0.53 0.57 0.80 1.48 1.82

8) Total Asset Turnover

Net Sales

Avg. Total Assets

Years 2008 2007 2006 2005 2004

Net Sales 12,224,779,000 9,028,635,000 7,846,599,000 7,098,765,000 5,986,977,000

Avg. Total Assets 34,236,538,000 28,055,959,500 17,146,940,000 9,047,445,000 6,474,486,000

2008 2007 2006 2005 2004

0.36 0.32 0.46 0.78 0.92


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SHORT TERM LIQUIDITY RATIOS:

1) Current Ratio

2) Acid Test Ratio (Quick Ratio)

3) Cash Ratio

4) Cash Flow from Operations Ratio

5) Defensive Interval

6) Operative Cycle

7) Cash Cycle

8) Working Capital

1) Current Ratio

Current Assets

Current Liabilities

Years 2008 2007 2006 2005 2004

Current Assets 6,923,461,000 4,837,402,000 3,414,222,000 4,558,737,000 2,424,817,000

Current Liabilities 5,616,873,000 1,965,381,000 2,312,224,000 2,335,830,000 1,748,885,000

2008 2007 2006 2005 2004

1.23 :1 2.46 :1 1.48 :1 1.95 :1 1.39 :1

2. Acid Test Ratio (Quick Ratio)

C.A – Inventories

Current Liabilities

Years 2008 2007 2006 2005 2004

Current Assets 6,923,461,000 4,837,402,000 3,414,222,000 4,558,737,000 2,424,817,000

Inventories 4,493,748,000 2,922,031,000 2,132,838,000 1,551,482,000 1,474,885,000


2008 2007 2006 2005 2004

0.43 :1 1.66 :1 1.60 :1 2.94 :1 1.64 :1


ANNEXURE - VIII

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3. Cash Ratio

Cash + Mkt. Securities

Current Liabilities

Years 2008 2007 2006 2005 2004

Cash 199,188,000 101,022,000 106,703,000 2,019,950,000 144,886,000

Mkt. Securities - - - - 9,067


2008 2007 2006 2005 2004

0.04 :1 0.05 :1 0.05 :1 0.86 :1 0.08 :1

4. Cash flow from operation

Cash flow from Operation (Operating Profit + Deperication)Current Liabilities

Years 2008 2007 2006 2005 2004

Operating Profit 405,650,000 733,037,000 918,252,000 995,782,000 873,409,000

Deperication 858,377,000 529,558,000 348,173,000 375,573,000 397,330,000


2008 2007 2006 2005 2004

0.23 :1 0.64 :1 0.55 :1 0.59 :1 0.73 :1

5. Operation Cycle

A/R in days + Inventory turn over in days

Years 2008 2007 2006 2005 2004

A/C rec in days 42 43 37 37 39

Inventory turn over in days 120 118 103 96 115

2008 2007 2006 2005 2004


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162 160 140 133 154

6. Working Capital

Current Assets-Current Liabilities

Years 2008 2007 2006 2005 2004

Current Assets 6,923,461,000 4,837,402,000 3,414,222,000 4,558,737,000 2,424,817,000


2008 2007 2006 2005 2004 1,306,588,00

0 2,872,021,00

0 1,101,998,00

0 2,222,907,00

0 675,932,00

0


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PROFITABILITY ANALYSIS:

1) Net profit margin

2) Operating profit margin

3) Profit before tax

4) Net profit margin

5) Return on asset

6) Return on investment

7) Return on equity

8) Return on common equity

9) Operating asset turnover

10) Return on Operating asset

11) Dupont return on Op. asset

12) Dupont return on Total Asset

13) Contribution Margin

1. Net profit Margin

Net Profit / Loss

Net sales

Years 2008 2007 2006 2005 2004

Net Profit / Loss (195,825,000) 4,325,948,000 6,100,780,000 1,015,364,000 957,502,000

Net sales 12,224,779,000 9,028,635,000 7,846,599,000 7,098,765,000 5,986,977,000

2008 2007 2006 2005 2004 (1.6

0) 47.91% 77.75% 14.30% 15.99%


ANNEXURE - IX

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2. Operating profit Margin

Operating profit

Net sales

Years 2008 2007 2006 2005 2004

Operating profit 405,650,000 733,037,000 918,252,000 995,782,000 873,409,000

Net sales 12,224,779,000 9,028,635,000 7,846,599,000 7,098,765,000 5,986,977,000

2008 2007 2006 2005 2004

3.32% 8.12% 11.70% 14.03% 14.59%

3. profit/(Loss) before tax Margin

Profit/loss before tax

Net sales

Years 2008 2007 2006 2005 2004Profit/loss before tax (307,889,000) 4,632,948,000 6,347,840,000 1,329,925,000 1,186,621,000

Net sales 12,224,779,000 9,028,635,000 7,846,599,000 7,098,765,000 5,986,977,000

2008 2007 2006 2005 2004 (2.5

2) 51.31% 80.90% 18.73% 19.82%

4. Gross profit/(Loss) Margin

Gross Profit

Net sales

Years 2008 2007 2006 2005 2004

Gross Profit 943,299,000 1,199,273,000 1,294,604,000 1,352,979,000 1,308,602,000

Net sales 12,224,779,000 9,028,635,000 7,846,599,000 7,098,765,000 5,986,977,000


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2008 2007 2006 2005 2004

7.72% 13.28% 16.50% 19.06% 21.86%

5. Return on AssetNet income

Avg total asset

Years 2008 2007 2006 2005 2004

Net income (195,825,000) 4,325,948,000 6,100,780,000 1,015,364,000 957,502,000

Avg total asset 34,236,538,000 28,055,959,500 17,146,940,000 9,047,445,000 6,474,486,000

2008 2007 2006 2005 2004 - 15.42% 35.58% 11.22% 14.79%

6. Return on Total Equity:-

Net income / loss – Divined on P/S

Avg. total equity

Years 2008 2007 2006 2005 2004Net income /

loss (195,825,000) 4,325,948,000 6,100,780,000 1,015,364,000 957,502,000

Divid.on P/S - - - - -

Avg. total equity 17,221,672,000 15,921,784,500 10,704,526,000 5,964,057,500 4,191,860,000

2008 2007 2006 2005 2004

-1.14% 27.17% 56.99% 17.02% 22.84%

7. Return on Common Equity:-

Net income – dividend on P/S

Common equity

Years 2008 2007 2006 2005 2004


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Net income (195,825,000) 4,325,948,000 6,100,780,000 1,015,364,000 957,502,000

Divid.on P/S - - - - -

Common equity 17,221,672,000 15,921,784,500 10,704,526,000 5,964,057,500 4,191,860,000

2008 2007 2006 2005 2004 - 27.17% 56.99% 17.02% 22.84%

8. Return on Investment:-

Net income+[interest ×(1-tax rate)]

Avg.(LTD+equity)

Years 2008 2007 2006 2005 2004Net income (195,825,000) 4,325,948,000 6,100,780,000 1,015,364,000 957,502,000

Interest Expense 1,662,094,000 367,378,000 78,909,000 185,529,000 139,008,000Tax Rate 35% 35% 35% 35% 35%

Long Term Debt 12304400000 12346500000 6000000000 1000851000 6351000Equity 16272572000 18170772000 13672797000 7736255000 4191860000

Avg.(LTD+equity) 29547122000 25095034500 14204951500 6467658500 4198211000

2008 2007 2006 2005 2004

2.99% 18.19% 43.31% 17.56% 24.96%

9. Operating Asset turnover:-

Net Sales

Avg. operating asset

Years 2008 2007 2006 2005 2004

Net Sales 12,224,779,000 9,028,635,000 7,846,599,000 7,098,765,000 5,986,977,000

Avg. operating asset 653,897,000 9,385,722,000 4,446,485,000 1,563,369,000 675,932,000

2008 2007 2006 2005 2004

18.70 0.96 1.76 4.54 8.86


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10.Return on Operating Asset

Operating income

Avg. operating asset

Years 2008 2007 2006 2005 2004Operating

income 405,650,000 733,037,000 918,252,000 995,782,000 873,409,000

Avg. operating asset 653,897,000 9,385,722,000 4,446,485,000 1,563,369,000 675,932,000

11.Dupont Return on Operating Asset .

Operating income margin x Operating Asset Turnover

Years 2008 2007 2006 2005 2004Operating

income margin 3.32% 8.12% 11.70% 14.03% 14.59%

Operating Asset Turnover 18.70 0.96 1.76 4.54 8.86

2008 2007 2006 2005 2004

62.04% 7.81% 20.65% 63.69% 129.22%

12.Dupont Return on Total Asset .

Net income / loss margin x Total Asset Turnover

Years 2008 2007 2006 2005 2004Net income

margin -1.60% 47.91% 77.75% 14.30% 15.99%

Total Asset Turnover 0.36 0.32 0.46 0.78 0.92

2008 2007 2006 2005 2004

-0.57% 15.42% 35.58% 11.22% 14.79%


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Investor Analysis:1) Earning Per Share

2) Price Earning Ratio

3) Book Value per Share

4) Payout Ratio

5) Dividend Yield

6) Percentage of Earning Retained

7) Financial Leverage

1. Earning Per Share

Net Income - Pref: Stock Dividend

No. of Common Stock Outstanding

Years 2008 2007 2006 2005 2004

Net Income (195,825,000) 4,325,948,000 6,100,780,000 1,015,364,000 957,502,000

Pref: Stock Dividend - - - - -

No. of Common Stock Outstanding 84,379,504 73,373,482 69,879,507 69,879,507 47,537,080

2008 2007 2006 2005 2004 - 58.96 87.30 14.53 20.14

2. Price Earning RatioMarket Price Per Share

Earning Per Share

Years 2008 2007 2006 2005 2004Market Price Per

Share 81.19 363.80 204.00 202.00 198.85

Earning Per Share (2.32) 51.27 87.30 16.24 19.60

2008 2007 2006 2005 2004 - 7.10 2.34 12.44 10.15


ANNEXURE - X

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3. Book Value per share.Total Equity - Pref: Stock Equity

No. of Common Stock Outstanding

Years 2008 2007 2006 2005 2004

Total Equity 16,272,572,000 18,170,772,000 13,672,797,000 7,736,255,000 4,191,860,000

Pref: Stock Equity - - - - -

No. of Common Stock

Outstanding84,379,504 73,373,482 69,879,507 69,879,507 47,537,080

2008 2007 2006 2005 2004

192.85 247.65 195.66 110.71 88.18

4. Dividend Payout ratio.Dividend Per Share

Earning Per Share

Years 2008 2007 2006 2005 2004Dividend Paid - 418,194,000 417,914,000 402,496,000 402,996,000

No. of Common Stock Outstanding 84,379,504 73,373,482 69,879,507 69,879,507 47,537,080

Dividend Per Share - 5.70 5.98 5.76 8.48

Earning Per Share (2.32) 51.27 87.30 16.24 19.60

2008 2007 2006 2005 2004

- 11.12% 6.85% 35.47% 43.25%


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5. Dividend Yield.Dividend Per Share

Market Price Per Share

Years 2008 2007 2006 2005 2004

Dividend Per Share - 5.70 5.98 5.76 8.48

Market Price Per Share 81.19 363.80 204.00 202.00 198.85

2008 2007 2006 2005 2004 - 1.57% 2.93% 2.85% 4.26%

6. Percentage of retained earning.

Net Income – DividendNet Income

Years 2008 2007 2006 2005 2004

Net Income - 4,325,948,000 6,100,780,000 1,015,364,000 957,502,000

Dividend - 418,194,000 417,914,000 402,496,000 402,996,000

Net Income - 4,325,948,000 6,100,780,000 1,015,364,000 957,502,000

2008 2007 2006 2005 2004 - 90.33% 93.15% 60.36% 57.91%

7. Financial LeverageEarning Before Interest & Taxes

Earning Before Tax

Years 2008 2007 2006 2005 2004Earning Before

Interest & Taxes 405,650,000 733,037,000 918,252,000 995,782,000 873,409,000

Earning Before Tax (307,889,000) 4,632,948,000 6,347,840,000 1,329,925,000 1,186,621,000

2008 2007 2006 2005 2004 - 0.16 0.14 0.75 0.74

Long Term Analysis


ANNEXURE - XI

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1) Time Interest Earned Ratio

2) Debt Service Coverage Ratio

3) Fixed Charge Coverage

4) Debt Ratio

5) Debt Equity Ratio

6) Fixed Asset Coverage

1. Time Interest earned Ratio.

Earning Before Interest & Taxes

Interest Expenses


Interest & Taxes

405,650,000 733,037,000 918,252,000 995,782,000 873,409,000

Interest Expenses 1,662,094,000 367,378,000 78,909,000 185,529,000 139,008,000

2008 2007 2006 2005 2004

0.24 2.00 11.64 5.37 6.28

2. Debt Service Coverage Ratio.Earning Before Interest & Taxes

Int: Exp: + Current Maturity of LTD


Interest & Taxes 405,650,000 733,037,000 918,252,000 995,782,000 873,409,000

Interest Expense 1,662,094,000 367,378,000 78,909,000 185,529,000 139,008,000

Current Maturity of LTD 550,000,000 - - - -

2008 2007 2006 2005 2004

0.18 2.00 11.64 5.37 6.28


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3. Fix Charge Coverage Ratio.

Earning Before Interest & Taxes

Int: Exp: + Current Maturity of LTD + Rentals of LTD


Interest & Taxes 405,650,000 733,037,000 918,252,000 995,782,000 873,409,000

Interest Expense 1,662,094,000 367,378,000 78,909,000 185,529,000 139,008,000

Current Maturity of LTD 550,000,000 - - - -

Rentals of LTD - - - - -

2008 2007 2006 2005 2004

0.18 2.00 11.64 5.37 6.28

4. Debt Ratio.

Total Liabilities Total Assets

Years 2008 2007 2006 2005 2004Total

Liabilities 18,762,061,000 15,267,671,000 9,000,679,000 3,884,149,000 2,282,626,000

Total Assets 35,034,633,000 33,438,443,000 22,673,476,000 11,620,404,000 6,474,486,000

2008 2007 2006 2005 2004

53.55% 45.66% 39.70% 33.43% 35.26%


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5. Debt Equity Ratio.Long Term Debt

Capitalization (LTD + Equity)

Years 2008 2007 2006 2005 2004

Long Term Debt 12,304,400,000 12,346,500,000 6,000,000,000 1,000,851,000 6,351,000

Capitalization (LTD + Equity) 28,576,972,000 30,517,272,000 19,672,797,000 8,737,106,000 4,198,211,000

2008 2007 2006 2005 2004

43.06% 40.46% 30.50% 11.46% 0.15%

6. Fix Asset Coverage Ratio

Net Fixed Assets

Long Term Debt

Years 2008 2007 2006 2005 2004Net Fixed

Assets 27,828,311,000 18,187,991,000 13,230,634,000 6,286,300,000 3,294,543,000

Long Term Debt 12,304,400,000 12,346,500,000 6,000,000,000 1,000,851,000 6,351,000

2008 2007 2006 2005 2004

2.26 1.47 2.21 6.28 518.74


final report of financial statement analysis of packages limited lahore

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