Exide Financial Analysis

7/31/2019 Exide Financial Analysis

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FINANCIAL MANAGEMENTASSIGNMENT

Analysis Of Financial Statement

Organization EXIDE

Submitted by:M. Romaan Qamar (1046101)

MBA-Day(A)

Submitted to:Mr. Imran Qamar


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1.HORIZONTAL ANALYSIS

Horizontal Analysis of Balance Sheet:

Balance Sheet

2011

In thousand

2010

In thousand Horizontal Analysis

Cash 567,426 286,206 98%

Short Term Investments 317,367 203,098 56%

Accounts Receivable 36,358 19,563 86%

Inventory 1,856,140 1,457,671 27%

Current Assets 2,959,417 2,107,704 40%

Long Term Investments 1,051,084 796,908 32%

Net Fixed Assets 1,027,910 776,542 32%

Total Assets 4,010,501 2,904,612 38%

Current Liabilities 2,366,350 1,710,480 38%

Total Liabilities 2,412,097 1,754,611 37%

Total Stockholders' Equity 1,148,488 900,499 28%

Note: values in the table are taken directly from annual report of Exide of 2011.

Comments:

Increase in cash holding increases by 98% between 2011 and 2010. The reason behind this

increase is increase in the cheques in hand, cash in hand and current account amount. Cheque in handamount increase by 102% and current account increase by 97% and cash in hand increased by 45%. The

short term investment increases by 56%. Account receivable increase by 86%. Inventory increase by

27%. The company is very stable with respect to asset to liabilities. Company is increasing its asset at

sustainable pace. Thought company current assets are increasing which does not show a company

internal position but its fixed assets are increasing as compared to total liabilities.

Horizontal Analysis of Profit and Loss Statement:

Income Statement

2011

In thousand

2010

In thousand

Horizontal

AnalysisRevenue 7,711,452 6,189,135 25%

Cost of Goods Sold -6,643,630 -5,413,928 23%

Interest Expense -128,489 -78,948 63%

Tax Expense -153,336 -106,267 44%

Income from Cont Operations 558,215 382,502 46%

Net Income 276,390 197,287 40%


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Comments:

Revenue from sales increased by 25% and so does the cost of sales also increased by 23%. These

revenues are the net sales, which takes in account the sales tax, excise duty and commission and

discount to distributors. The interest expense increased in two years is of 63%, the interest expense

increased because of two major heads of interest expense 1. Short term finance, 2. Loan from a

director. Tax expense increased by 44%. Net income increased by 40%.

2.VERTICAL ANALYSIS

Vertical Analysis of Balance Sheet:

Balance Sheet

2011

In

thousand

Vertical

analysis 2011

2010

In

thousand

Vertical

analysis

2010

Cash 567,426 14.1% 286,206 9.9%

Short Term Investments 317,367 7.9% 203,098 7.0%

Accounts Receivable 36,358 0.9% 19,563 0.7%Inventory 1,856,140 46.3% 1,457,671 50.2%

Current Assets 2,959,417 73.8% 2,107,704 72.6%

Long Term Investments 1,051,084 26.2% 796,908 27.4%

Net Fixed Assets 1,027,910 25.6% 776,542 26.7%

Total Assets 4,010,501 100.0% 2,904,612 100.0%

Current Liabilities 2,366,350 59.0% 1,710,480 58.9%

Total Liabilities 2,412,097 60.1% 1,754,611 60.4%

Total Stockholders' Equity 1,148,488 28.6% 900,499 31.0%


Comments:

The company current assets increase stably but inventory decreased by -3.9%in 2011. The

company long term assets decreased by small amount because the company gave loans free of interest

to purchase motorcycle and payback the loan with in one year. Whereas current liabilities increased by

small percentage.


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Equity of the company decreased because of the National bank of Pakistan which held 789,686

number of shares in 2010 sold back the shares which it held in 2010.

Vertical Analysis of Income Sheet:

Income Statement

2011

In

thousand

vertical

analysis

2010

In

thousand

vertical

analysis

Revenue 7,711,452 100.0% 6,189,135 100.0%

Cost of Goods Sold -6,643,630 86.2% -5,413,928 87.5%

Interest Expense -128,489 1.7% -78,948 1.3%

Tax Expense -153,336 2.0% -106,267 1.7%

Income from Cont

Operations 558,215 7.2% 382,502 6.2%

Net Income 276,390 3.6% 197,287 3.2%


Comments:

Watching this, we first come at operating Efficiency which shows that how effective is the

company in lowering its cost of sales. Exide operating efficiency has increased. The company is

decreasing its cost as it increases its sales during the year of 2010-2011. Interest expense increase

because company considered short term financing in order to fulfill the short term needs. Tax expense

increases because of the increase in operating profits (income).

3.RATIO ANALYSIS & NOTES ANALYSIS

Growth Ratios:

In growth ratio we consider three ratios. These ratios are as follows;

1. Sales Growth:

The sales growth for 2009-2010 increased by 9.9% and sales growth for

2010-2011 is 24.6%. Increase in sales is of 14.7% which means that

company is progressive sales growth.

2. Income Growth:


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The income of the company increased from 44.6% in period of 2009-2010

to 45.9% in period 2010-2011.

3. Asset Growth:

The asset growth ratio tells the percentage amount of asset increased or

decreased between two years. The company total assets decrease in

2010-2011 as compared to asset in 2009-2010. The asset decreased by

4.5% proportion.

Activity Ratios:

Activity ratio captures the effect of inventory, asset and receivable on revenues.

Following are the ratios that define activity ratio:

1. Receivable Turnover:

The companys receivable decrease from 2010 to 2011. This means that

company is trying to decrease its receivable in order minimize its

opportunity cost and keeping more money at its own disposal.

2. Inventory Turnover:

Inventory turnover of the company is decreasing as it falls from 4.7 to

4.0. The decrease of 0.7 in inventory.

3. Fixed Asset Turnover:

Fixed of the company are decreasing. This decrease is because of the

reason that company is making more revenue but not increasing its fixed

asset with same proportion.

Profitability Ratios:

The long term success of a company depends upon the funds it can generate for

reinvestment and growth, along with its ability to provide a satisfactory return on investment. Profitability of the company can be shown through number of ways. Each of these ratios are

important to see the full picture.

1. Profit Margin:

It is the ratio of revenues to income from continued operations. The profit

margin of the company increased by 1% that means that each additional revenue

of the company adds on to the profit of the company.


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2. Return on Asset(ROA):

Return on asset shows the effect of income from continued operations on total

asset. ROA is 16.1% in year 2011 and 15.5% in 2010. The ROA increase over the year.

3. Return on Equity(ROE):Return on equity is the ratio of income from continued operations to total

stockholder equity. Income generated from stockholder equity is 54.5% in year

2011 and in 2010 it was 47%. The ROE increase over year.

4. Dividend Payout Ratio:

It is the ratio of dividend paid to net income. The company paid less dividends

then pervious year. In 2010 dividend payout ratio was 16% , in 2011 it was 12%.

Which means that the company paid less dividends as compare to the pervious

year and keeping in mind that the net income increased 2011.

Liquidity Ratios:

1. Current Ratio:

Current Ratio= current asset/current liabilities

2011=1.25%

2010=1.23%

2. Quick Ratio:

Quick Ratio= (cash + account receivable + short term investment) / current

liabilities

2011=0.39%2010=0.30%

Solvency Ratios:

Solvency means ability of a company to meet its liabilities.Solvency or credit worthinessratios are calculated to determine the degree of financial risk existing in a business entity

before and after making an investment in a project.

1. Debt to Total Asset:

It is the ratio of total liability to total asset. It gives us the proportion of how

much part is of liability of the total asset. This shows that for two years the

company maintains its debt 60% of the total asset.


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3.TREND ANALYSIS:

Keeping in view the revenue of the company from 2007 to up till now, the percentage change in

revenue fall after 2008. The percentage changes in revenues are calculated as 51.53%, 1.54%,

9.92%, and 25% for year 2007, 2008, 2009, 2010 and 2011. As it is clear from the figure that

company had slum after year 2008 but started to recover on progressive trend. In the future

company will be able to generate more revenue in percentage change bases unless meet with

some unusual circumstances.

Same is the case with net income trend. The companys net income graph shows positiveincrease as shown in the table. So we can say that company will have high income in next year

also unless meet with some unusual circumstances.

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

5 Years Ago4 Years Ago3 Years Ago Prior Year Current Year

REVENUE TREND

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

5 Years Ago 4 Years Ago 3 Years Ago Prior Year Current Year

NET INCOME TREND


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Cash flow of the company is very uncertain. The company cash flow was more than its income

in 2009, but dramatically it went in negative in year 2010 and then again went up in 2011. In

year 2010 the company increased its stock in trade, spares and trade debts. Because of this

reason the cash flow from operating activity was negative.

The company is increasing its asset over the period of time. It is expected to increase further

with same proportion. Keeping other things constant.

Altmans Z-score:

If the company has a Z score that falls above a 3.0, the company is said to be safe

and has an excellent chance of being successful in the next year. A score that is from 2.7to 2.99 indicates that the company should be worried. Cutting back on expenses would

be a good strategy. A score from 1.8 to 2.7 shows a company will go bankrupt within

next two years.

The Altman Z Score of EXIDE Pakistan Limited is 4.5554. That means that company is

financially very stable and profitable.

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

3 Years Ago Prior Year Current Year

INCOME TO CASH FLOW COMPARISON

Income -ContinuingOperations

Cash FlowfromOperations

$0$500,000

$1,000,000$1,500,000$2,000,000$2,500,000$3,000,000$3,500,000$4,000,000$4,500,000

3 Years Ago Prior Year Current Year

ASSET CHANGES

Total Assets

Documents

Exide Financial Analysis