Table of Contents

INCOME STATEMENT .......................................................................................................................................... 2

BALANCE SHEET ................................................................................................................................................... 4

Income Statement - Year-to-Year Percentage Changes ........................................................................ 6

ACTIVITY RATIOS & ANALYSIS ....................................................................................................................... 8

Inventory Turnover ......................................................................................................................................................... 8

Total Asset Turnover ....................................................................................................................................................... 8

Average Collection Period ............................................................................................................................................. 9

Recieveable Turnover ................................................................................................................................................... 10

Days Receivables ............................................................................................................................................................. 10

Days Inventory ................................................................................................................................................................. 11

Fixed Asset Turnover .................................................................................................................................................... 12

LIQUIDITY RATIOS & ANALYSIS ................................................................................................................... 12

Current Ratio .................................................................................................................................................................... 12

Quick Ratio ........................................................................................................................................................................ 13

Cash Ratio .......................................................................................................................................................................... 14

LEVERAGE RATIOS & ANALYSIS.................................................................................................................... 14

Debt to Asset Ratio ......................................................................................................................................................... 14

Debt to Equity Ratio....................................................................................................................................................... 15

Coverage Ratio ................................................................................................................................................................. 16

PROFITABLITY RATIOS & ANALYSIS .............................................................................................................. 16

Net Profit Margin ............................................................................................................................................................ 16

Return on Asset ............................................................................................................................................................... 17

Gross Profit Margin ........................................................................................................................................................ 18

CONCLUSION ......................................................................................................................................................... 18

1

FATIMA GROUP OF COMPANIES

FINANCIAL ANALYSIS

Financial analysis is the process of identifying the financial strengths and

weaknesses of the firm and establishing relationship between the items of the balance sheet and

profit & loss account.

Financial ratio analysis is the calculation and comparison of ratios, which are derived

from the information in a company’s financial statements. The level and historical trends of these

ratios can be used to make inferences about a company’s financial condition, its operations and

attractiveness as an investment. The information in the statements is used by

Trade creditors, to identify the firm’s ability to meet their claims i.e. liquidity position of the

company.

Investors, to know about the present and future profitability of the company and its financial

structure.

Management, in every aspect of the financial analysis. It is the responsibility of the

management to maintain sound financial condition in the company.

2

INCOME STATEMENT Year Year

In Thousands 2013 2012

Revenue component 1

$

-

$

-

Revenue component 2

Revenue component 3

Revenue component 4

Total Revenues or Sales

33,495,889

29,518,623

Cost of Goods Sold

13,712,677

12,252,427

Operating Income

19,783,212

17,266,196

Selling Expenses

1,430,122

1,233,944

General & Administrative

1,098,985

738,792

Earnings Before Interest, Taxes,

Depreciation & Amortization

(EBITDA)

17,254,105

15,293,460

Depreciation and Amortization

5,179,348

6,279,956

Earnings Before Interest &

Taxes (EBIT)

12,074,757

9,013,504

245,776

67,033

Net Interest Expense

4,298,348

2,969,418

Other Expense (Income)

3

Net Income Before Taxes (NIBT)

8,022,185

6,111,119

Income Tax Expense

Net Income After Taxes (NIAT)

$

8,022,185

$

6,111,119

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

2013 2012

Revenues

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

2013 2012

Net Income After Taxes

4

BALANCE SHEET

Year Year

2013 2012

In Thousands 2013 2012

Assets

Cash & Cash Equivalents

$

238,294

$

984,144

Accounts Receivable

1,674,063

1,467,655

Inventory

3,850,150

3,230,805

Stores & Spares

Short term Loan to associated

Company

3,000,000

Stock in Trade

2,702,076

2,507,927

Trade Debts

99,181

138,480

Prepaid Expenses & Deposits

Other Current Assets

Total Current Assets

11,563,764

8,329,011

Property Plant and Equipment

65,695,396

65,882,892

Intangible Assets

42,726

33,881

Longterm Deposits

10,248

11,361

Longterm Investments

85,190

85,190

5

Liabilities and Stockholder's Equity

Liabilities

Accounts Payable

6,650,695

4,996,727

Accrued Liabilities

383,432

499,478

Short term Finance Secured

2,302,516

2,690,246

Current Maturities of LT Debt

5,938,078

4,085,379

Related Party Notes Payable

Other Current Liabilities

Total Current Liabilities

15,274,721

12,271,830

LT Debt, net of current portion

22,647,450

27,023,742

Dividend & Markup Payable

-

2,917,615

Deferred Income Taxes

8,608,816

4,843,755

Total Liabilities

46,530,987

47,056,942

Stockholder's Equity

Capital Work in Progress

1,892,621

1,662,461

Other Fixed Assets

Total Fixed Assets

67,726,181

67,675,785

Total Assets

79,289,945

76,004,796

6

Common Stock

21,000,000

21,000,000

Retained Earnings

9,968,958

6,157,854

Share Premium

1,790,000

1,790,000

Additional Paid-in Capital

Other Equity

Total Stockholder's Equity

32,758,958

28,947,854

Total Liabilities & Stockholder's Equity

Must match with Total Assets

$

79,289,945

$

76,004,796

Working Capital

(Current Assets

- Current Liabilities)

$

(3,710,957)

$

(3,942,819)

Income Statement - Year-to-Year Percentage Changes

2013

% Increase (Decrease)

Over Previous Year

2012

% Increase

(Decrease) Over

Previous Year

Two-Yr Average

Percentage

Increase/(Decrease)

Revenue component 1

Revenue component 2

Revenue component 3

Revenue component 4

Total Revenues or

Sales (11.87%) (100.00%) (55.94%)

7

Cost of Goods Sold (10.65%) (100.00%) (55.32%)

Operating Income (12.72%) (100.00%) (56.36%)

Selling Expenses (13.72%) (100.00%) (56.86%)

General &

Administrative (32.78%) (100.00%) (66.39%)

Earnings Before

Interest, Taxes,

Depreciation &

Amortization

(EBITDA) (11.36%) (100.00%) (55.68%)

Depreciation and

Amortization 21.25% (100.00%) (39.38%)

Earnings Before

Interest & Taxes

(EBIT) (25.35%) (100.00%) (62.68%)

Net Interest Expense (30.92%) (100.00%) (65.46%)

Other Expense

(Income)

Net Income Before

Taxes (NIBT) (23.82%) (100.00%) (61.91%)

Income Tax Expense

Net Income After

Taxes (NIAT) (23.82%) (100.00%) (61.91%)

8

ACTIVITY RATIOS & ANALYSIS Activity ratios are used to measure the speed with which various accounts are converted into sales

or cash. With regard to current accounts, measures of liquidity are generally inadequate

Inventory Turnover

Inventory Turnover 2013 2012

COGS 13,712,677 12,252,427

÷

Inventory 1,674,063 1,467,655

=

Inventory Turnover 8.19 8.35

Interpretation

The increase in CGS indicates that production is more in year 2013. Inventory turnover commonly

measure the activity, or liquidity, of a firm’s inventory. This ratio is used to measure the number

of times a company sells its inventory during the period. High inventory turnover ratio is considered as good and the logic is that company is efficiently managing and selling its inventory.

Inventory turnover of the company is 8.19 times in the year 2013 and it has decreased from the

previous year ratio that is 8.35. There is very slight change in the ratio

Total Asset Turnover

Total-Asset Turnover 2013 2012

Sales 33,495,889 29,518,623

÷

Total Assets 79,289,945 76,004,796

= Total Asset

Turnover 0.42 0.39

8.19

8.35

8.10

8.15

8.20

8.25

8.30

8.35

8.40

2013 2012

9

INTERPRET

This type of ratio is used to measure the efficiency of the company that how nicely the company

used their total assets to generate revenue. Total assets turnover indicates the efficiency with which

the firm uses all its assets to generate sales. Generally, the higher a firm’s total asset turnover, the

more efficiently its assets have been used. This measure is probably of greatest interest to

management, because it indicates whether the firm’s operations have been financially efficient.

Fatima Fertilizers have increased ratio of Total Asset Turnover. As compare to previous year it is

managed well efficiently. In 2012 this ratio was 0.39 and in year 2013 it is increased and goes at

0.42 times.

Average Collection Period

Average Collection Period 2013 2012

A/R 1,674,063 1,467,655

÷ Average Daily Sales 91,769.6 80,872.9

= Average Collection

Period (days) 18.24 18.15

INTERPRET

Average collection period indicates that how many days are required to collect amount from the

trade debts. The earlier the cash is received from the debtors; the better will be for the company.

Average collection period of the company showed nominal change in the collection period. This

means that company’s average collection is almost same.

0.42

0.39

0.37

0.38

0.39

0.40

0.41

0.42

0.43

2013 2012

18.24

18.15

18.10

18.15

18.20

18.25

2013 2012

10

Recieveable Turnover

2013

Receivables Turnover sales Insert sales below

Insert receivables below

20.0087 receivables 33495889.00 1674063.00 2012

Receivables Turnover sales Insert sales below

Insert receivables below

20.1128 receivables 29518623.00 1467655.00

INTERPRET

This ratio indicates that how many times accounts receivable is converted into cash a high turnover

indicates the efficiency of the management. Accounts receivable turnover has increased to 49.46

times in 2013 from 43.62 times in the year 2012. This is a good sign for the company. So Fatima

Fertilizers is converting its receivables into cash quickly as compared to 2012.

Days Receivables

2013

Days Receivables 360 Insert receivables turn below

17.9922 receivables turn

360 20.01 2012

Days Receivables 360 Insert receivables turn below

17.8990 receivables turn

360 20.11

0.4

0.45

0.5

2012 2013

Series1

11

INTERPRET

Average collection period ratio is used to determine the average number of days required to

convert account receivables/debtors into cash. The earlier the cash is received from the debtors;

the better will be for the company. Average collection period of the company has reduced a little bit

in year 2013 from the year 2012. This shows that company is almost performing same in collection

as were in previous year.

Days Inventory

2013

Days Inventory 360 Insert inventory turn below

43.9560 inventory turn

360 8.19 2012

Days Inventory 360 Insert inventory turn below

43.1138 inventory turn

360 8.35

INTERPRET

Average age of inventory tells that for how many days on average the inventory is held .The greater

the number of days, the inefficient will be the management. Average age of inventory of the company

has increased to 0.49 year 2013 from 0.43 in 2012. This shows inventory is kept for high number of

days as compared to the last year.

0

1

2

3

2012 2013

Series1

0.4

0.45

0.5

2012 2013

Series1

12

Fixed Asset Turnover

2013

Fixed Asset Turnover Sales Sales Net Fixed Asset

0.4946 Net Fixed Asset 33495889.00 67726181.00 2012

Fixed Asset Turnover Sales Sales Net Fixed Asset

0.4362 Net Fixed Asset 29518623.00 67675785.00

INTERPRET

This ratio is used to measure the productivity of the company that how nicely a company

used their fixed assets in order to generate certain level of revenue.

Net fixed assets turnover of the company is 49.46 times in the year 2013 which has significantly

Increased as compared to the last year’ s turnover of 43.62times. This is a good sign for the company.

As we know that higher the ratio higher will be the utilization of the total fixed asset to

produce revenue. Here fixed asset turnover ratio is increased over the year so there is efficient

utilization of company’s fixed assets to produce revenue.

LIQUIDITY RATIOS & ANALYSIS

Current Ratio

Current Ratio 2013 2012

Total Current Assets 11,563,764 8,329,011

÷

Total Current Liabilities 15,274,721 12,271,830

= Current Ratio 0.76 0.68

0.4362

0.4946

0.4

0.45

0.5

2012 2013

Series1

13

INTERPRET

Current ratio of the company in 2012 was 0.68 and it is increased in the year 2013 which is 0.76. There is increase in Current Ratio. Now we can see that the figure has increased in the current ratio when compared to the year 2012. • It’s a positive sign for the progress of the company

Quick Ratio

Quick Ratio 2013 2012

Total Current Assets - Inventories 7,713,614 5,098,206

÷ Total Current Liabilities 15,274,721 12,271,830

= Quick Ratio 0.50 0.42

INTERPRET

Quick assets are those assets which can be converted into cash within a short period of time. The

above comparison shows that the quick ratio has increased as the company ended the year 2013.

It is a healthy sign for the company.

• Now it has already been discussed that the company’ current assets have increased comparatively.

The financial statements show that the firm’s inventory has decreased. That has caused the quick

ratio figure to increase.

• Hence the firm’s overall ability to satisfy the short –term obligations is increasing which is good.

0.76

0.68

0.60

0.65

0.70

0.75

0.80

2013 2012

0.50

0.42

-

0.20

0.40

0.60

2013 2012

14

Cash Ratio

2013

Cash Ratio Cash & Cash Equivalent

Cash & Cash Equivalent Current Liabilities

0.0156 Current Liabilities

238294.00 15274721.00 2012

Cash Ratio Cash & Cash Equivalent

Cash & Cash Equivalent Current Liabilities

0.0802 Current Liabilities

984144.00 12271830.00

INTERPRET

Cash Ratio is an indicator of company's short-term liquidity. It measures the ability to use its cash

and cash equivalents to pay its current financial obligations.

Cash ratio measures the immediate amount of cash available to satisfy short-term liabilities. A cash ratio of 0.5:1 or higher is preferred. In 2013 cash ratio is decreased by 2012. Which is not up to the

mark.

LEVERAGE RATIOS & ANALYSIS Debt to Asset Ratio

Debt-to-Assets Ratio 2013 2012

Total Debt 46,530,987 47,056,942

÷ Total Assets 79,289,945 76,004,796

= Debt-to-Assets Ratio 0.59 0.62

2012

2013

15

INTERPRET

The debt ratio measures the proportion of total assets financed by the firm’s creditors. The higher

this ratio, the greater the amount of other people’s money being used in an attempt to generate

profits. Fatima Fertilizers debt ratio has decreased to 59% in the year 2013 from 62% in the year

2012. This shows that the company has decreased its dependence on the outsider’s sources of

finances.

Debt to Equity Ratio

Debt-to-Equity Ratio 2013 2012

Total Debt 46,530,987 47,056,942

÷ Total Equity 32,758,958 28,947,854

= Debt-to-Equity Ratio 1.42 1.63

INTERPRET

The debt-equity ratio indicates the relationship between the long-term funds provided by creditors

and those provided by the firm’s owners. It is commonly used to measure the degree of financial

leverage of the firm. Fatima Fertilizer’s debt equity ratio is 1.42 in the year 2013 and has decreased

significantly from 1.63 in the year 2012. This shows that debts are less as compared to shareholders

equity.

1.42

1.63

1.30

1.35

1.40

1.45

1.50

1.55

1.60

1.65

2013 2012

0.5

9

0.6

2

2 0 1 3 2 0 1 2

16

Coverage Ratio

Times Interest Earned (TIE) or Coverage Ratio 2013 2012

EBIT 12,074,757 9,013,504

÷ Interest Expense 4,298,348 2,969,418

= Times Interest Earned 2.81 3.04

INTERPRET

Interest coverage ration tells that how many times the firm is able to pay its financial charges out of

its profit .A high ratio is desirable. This ratio for the company is 2.81 times in the year 2013 and has

significantly decreased from 3.04 times in the year 2012. This not shows good sign for the company.

The decreasing trend shows that the firm is not having ability to make contractual interest

payments.

PROFITABLITY RATIOS & ANALYSIS

Net Profit Margin

2013 2012

NIAT 8,022,185 6,111,119 ÷ Sales 33,495,889 29,518,623

= Net Profit Margin 0.24 0.21

2.81

3.04

2.65 2.70 2.75 2.80 2.85 2.90 2.95 3.00 3.05 3.10

2013 2012

17

Interpretation

The net profit ratio is the overall measure of the firm’s ability to turn each rupee of income from

services in net profit. If the net margin is inadequate the firm will fail to achieve return on

shareholder’s funds. High net profit ratio will help the firm service in the fall of income from services,

rise in cost of production or declining demand.

The net profit is increased because the income from services is increased. The increment resulted a

slight increase in 2013 ratio compared with the year 2012.

Return on Asset

Return on Assets 2013 2012

NIAT 8,022,185 6,111,119 ÷ Total Assets 79,289,945 76,004,796

= Return on Assets 0.10 0.08

Interpretation

This is the ratio between net profit and total assets. The ratio indicates the return on total

assets in the form of profits.

The net profit is increased in the current year because of the increment in the income from

services due to the increase in Operations.

0.24

0.21

0.19

0.20

0.21

0.22

0.23

0.24

0.25

2013 2012

0.10

0.08

-

0.02

0.04

0.06

0.08

0.10

0.12

2013 2012

18

Gross Profit Margin

Gross Profit Margin 2013 2012

Sales – COGS 19,783,212 17,266,196

÷ Sales 33,495,889 29,518,623

= Gross Profit Margin 0.59 0.58

INTERPRET

Gross profit for the year increased significantly to PKR 19.8 Billion reflecting an increase of PKR 2.5

Billion over last year with an overall increase of 14.6%, showing efficient utilization of raw material

in spite the unfavorable exchange rate fluctuation which directly impacted the cost of production.

Gross margins registered a slight improvement to 59.1% against 58.5% last year.

CONCLUSION

In the end I conclude that Fatima Fertilizer is operating well than year 2012. All the ratios showed

that Fatima Fertilizer is progressing. Some of the areas are must be undertaken to remove

discrepancies and make company more profit able.

0.59

0.58

0.58

0.58

0.59

0.59

0.59

0.59

2013 2012