Final Project of Business Finance

8/6/2019 Final Project of Business Finance

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1/4/2011

Ahmer Javed 4291 Farman Saddique 4293 Zubair Bajwa 4281

Waqas Tahir 4279 Syed Nayyar Sajjad 4253 Zohaib Shakoor 4250

MR.MAZHAR

HUSSAIN FINANCIAL ANALYSIS



Financial Analysis Of Dewan Cement Ltd.

History of Dewan Mushtaq Group:

The history of Dewan Mushtaq Group goes way back to the year 1916 to the State of

Patiyala in the Punjab Province of India when a small cottage industry was set up by Dewan

Mohammad and his son Dewan Mushtaq Ahmed to manufacture garments. During 1918,

another establishment was started in Karachi to import clothing and other multifarious

commodities which were then sold all over India.

In 1947, the Dewan family migrated to Pakistan. They settled in Karachi, formed

Dewan Mushtaq Sons, and started trading in commodities like tea, sugar, second-hand clothing,

garments and fabrics. Due to hard work and honest dealings of the family, the business rose to

new heights and by late f ifties, the turnover of the f irm was as signif icant as Rs. 60 million per

annum.

In 1968, the Dewan Family, under the leadership of Dewan Mohammad Umer

Farooqui, ably supported by his younger brother, Dewan Salman Farooqui, decided to enter the

industrial arena.

The f irst industrial unit was set up in 1970 under the name and style of Dewan

Textile Mills Limited with a capacity of 25,080 spindles which has since been increased to

61,704 spindles. The Group strengthened its footing in the textile f ield by taking over another

textile unit in 1975, now known as Dewan Mushtaq Textile Mills Limited with an installed capacity of 25,776 spindles. Thereafter, the Group established another spinning unit Dewan

Khalid Textile Mills Limited, consisting of 26,624 spindles.

By mid of 1980's, the Group with its characteristics of honesty, integrity and

determination, became one of the major textile groups in the country. At this stage, the Group

decided to diversify its activities to other spheres and entered the sugar industry. In 1987, the

Group established Dewan Sugar Mills Limited with a sugar cane crushing capacity of 3,500

metric tons/day which has been gradually expanded to 9,000 metric tons/day,

thus making it one of the largest sugar plants of the country. The Mills obtained ISO

Certif ication in 1998.




The Group f urther diversif ied its range of business by setting up capital-intensive

polyester staple f ibre plant under the name and style of Dewan Salman Fibre Limited. The

Group's credibility is evident f rom the fact that Dewan Group was able to obtain the

collaboration with the world's giant conglomerates like Mitsubishi Corporation of Japan and

Sam Yang Company Limited, Republic of Korea and set up the state-of -the-art plant in 1990.

The Company signed an agreement with Messrs Noyvallesina Engineering, an Italian

company, for establishing an Acrylic Fibre and Tow Plant as part of its expansion plan. The

Acrylic Plant with an installed total capacity of 55,000 tons per annum commenced commercial

production operations f rom 1st July, 2000. In the f irst phase, the Acrylic Plant is producing

25,000 tons acrylic f ibre. In phase II, the output will be raised by 30,000 tons.

The Group manif ested its decision to diversify into automobile industry of Pakistan

through the incorporation of Dewan Farooque Motors Limited on December, 1998. Within this

month, two more milestones were reached: the signing of Technical License and Exclusive

Distributor agreements with Hyundai Motor Company, Korea's No. 1 and world's seventh

largest automobile manufacturer.

1999 marked another important year in the history of the Group when Dewan

Farooque Motors signed the Technical Collaboration Agreement with Kia Motors Corporation of

South Korea, in July, 1999. Hyundai-Kia Together, are now the world's six largest automobile

manufacturers.

Dewan Farooque Motors is now a key player in the automobile industry of the

country off ering an impressive line up of passenger cars and commercial vehicles. Its state-of -

the-art plant has a capacity of 10,000 vehicles per annum on single shift basis and is equipped

with the latest facilities which include CED paint system and robots for the f inal coat.

June, 2000, marked another important milestone in the history of the Group when

its flagship company Dewan Salman Fibre Limited, acquired Dhan Fibre Limited and f ully

merged and incorporated its facilities into its operations .The total output of Dewan Salman

Fibre Limited's 3 polyester units is 700 tons per day. The company today enjoys a market

leader's position and commands market share of 60% in the country's f ibre industry.

Introduction to Dewan cement:

Dewan Cement Limited (DCL) formerly Pakland Cement Limited, incorporated in 1980 and

listed on the Karachi and Lahore stock Exchanges is majority owned by Dewan Mushtaq

Group through its diff erent companies since 2004. The Group, a long established conglomerate

in the country, has interests in synthetic f ibers, automotive and allied, sugar and allied, textiles,

oil and gas, cement, and general trading sectors. It also enjoys the privilege of having business




associations with respected multinational corporations. The cement plant is located near Port

Qasim, Sindh, mainly serving the countrys south zone.

Prof essionals, mainly serving the group in diff erent capacities, dominate the companys BOD,

with only one member of Dewan family. The chief executive off icer, a chartered accountant by

prof ession, joined the company in August 2004 and is supported by a team of experienced prof essionals.

Mission Statement:

The mission of Dewan Mushtaq Group is to be the f inest Organization, and to conduct business

responsibly in a straightforward way.

Our basic aim is to benef it the customers, employees and shareholders, and to f ulf ill our

commitments to the society. Our hallmark is honesty, initiative and teamwork of our people

and our ability to respond eff ectively to change on all aspects of lif e including technology,culture and environment.

We will create a work environment, which motivates, recognizes, and rewards achievements at

all levels of the organization, because

IN ALLAH WE TRUST & IN PEOPLE WE BLIEVE




Vision:

I.T Department is dedicated to provide reliable information base using most modern technologyto potential users at all levels. Our prof essionals individually and collectively, will constantly

improve their competitive skills and excel in providing quality service covering all the aspects of

the technology.

By embarking into the digital age we will accelerate the positive eff ects and mitigate the

challenges as knowledge grows when shared.

We will innovate in a research-oriented manner with technologies to create our own f uture and

value added activities for prof itable relationships with our stakeholders, thus encouraging

intellectual curiosity for our products, service and insight that will help people around the

world, shape the ways business and education will be done in f uture. Our prof essionals and their competitive skills will be the hallmark that combined with technology innovation, expert

skills and teamwork, will keep us leaders in "CHANGE" to open new doors.

Dewan for Eastern Co. Ltd.

Dewan Far Eastern is the overseas sales off ice and responsible for obtaining export orders for

cotton yarn, produced by DMG Textile Division. This off ice is looked after by Mr. Taro Ishikawa.

Business Intelligence Unit:

Business Intelligence Unit f unctions as the market research and intelligence cell of DMG.

Though its principal responsibility is to collect and analyze the data about Fiber Industry, its key

players including its users, namely fabric producers, it also carries out specialized market

studies in other f ields namely, textiles, automobiles, sugar etc, and it also performs f inancial

analyses

Dewan Executive Development Centre:

Dewan Executive Development Centre was established in June 2000. It was formally

inaugurated on July 28, 2000 by Mr. Dewan Mohammad Yousuf Farooqui and was followed by a

seminar on the Seven Habits.




Objectives:

To spark a new and innovative ideas for the individuals so that they are competitive enough to

face the global economic and market environment.

y To equip DMG individuals with a thorough understanding of managerial and

technological skills in a manner that has a profound eff ect on their personality and

character.

y To build leadership qualities in individuals so that they can make use of it eff iciently

and eff ectively in order to make every unit productive.

y To help to bring about a paradigm shift by creating a dynamic and positive learning

environment and changing our corporate culture.

y To help DMG to cope with knowledge-based economy.

y To provide DMG staff with basic conceptual training and impart latest managerialconcepts / skills, so as to make them "knowledge workers" and on-line to deal with

the challenges of modern business.




Our Assurance:

We believe that DMG members are our most precious resource, our human capital. We also

believe 'human progress' to be the worthiest of goals through recruiting, developing,

motivating, rewarding and retaining personnel of exceptional competence and providing them

with a healthy working environment, competitive compensation, excellent opportunities for

growth and a high degree of job security.

Seminars / Training Courses Conducted:

y The Seven Habits of Highly Eff ective People

y Star Off ice Training

y Communication Concepts and Skills, Level-I

y Communication Concepts and Skills, Level-II

y Seminar on Business Ethics

y Finance for Non-Finance Executives

y Presentation Skills

y Off ice Etiquettes and Mannerism

Future Programs:

y Teamwork

y Time Managementy Eff ective Meetings Basic Supervision Skills (Urdu) Industrial

y Saf ety, Firef ighting & First Aid

y Motivation & Leadership

y Knowledge Management

y Emotional Intelligence

y Negotiation Skills

y Change Management

y Conflict Management

y Skills in Selling

y Customer Service

Social & Community Welfare:

The Group is f ully committed to the vision and principles laid down by its founding fathers. In

keeping with its corporate philosophy and the spirit of social service and human respect, it

strives to f ulf ill its corporate social responsibility. As an exemplary corporate citizen, the Group




has set high standards in the area of public service and community welfare through a variety of

philanthropic contributions.

Dewan Group has made following humble contributions to the nation: -

y Fully f inanced the construction (including purchase and installation of medicalequipment) of Dewan Farooque Medical Complex near Civil

y Hospital. This was the single largest donation of Rs. 250 millions. The Project was

completed in a record time and handed over to the Sindh Institute of Urology and

Transplantation (SIUT).

Played a key role in the realm of education, health and religion through setting up and

f inancing of following projects:

y A mosque at Su jawal, Dewan City, District Thatta

y Dewan Farooque Medical Centre ( 250-bed Hospital complete with Operation

Theatre and a Dialysis Unit), Su jawal, Dewan City, Thatta

y Dewan Farooque Memorial High School, Su jawal, Dewan City, Thatta

y Dewan Farooque Memorial High School, Hattar, District Haripur, NWFP

y Dewan Farooque Memorial High School, Hattar, District Haripur, NWFP

y Dewan Farooque Memorial High School, Kotri, Sindh

y Dewan Salman Dispensary Thatta, Sindh

y Dewan Mushtaq Coronary Care Unit (Civil Hospital) Hyderabad

y Dewan Mushtaq Coronary Care Unit (Civil Hospital) Sukkur

y Dewan Mushtaq Mosque at Old Clifton, Karachi

y Dewan Farooque Mosque at Federal 'B' Area, Karachi

y Dewan Mosque at Sector F-10, Markaz, Islamabad

DATA COLLECTION SOURCES

Main source of data collection [www.dewangroup.com.pk]

Net searching

Years of Analysis:

2007± 2009




RATIO ANALYSIS

Liquidity ratios

Leverage ratios

Activity ratios

Trend Analysis

Common Siza Analysis

Index Analysis

Ratios

Dewan Cement Ltd.Years

2009 2008 2007

Liquidity Ratio

Current Ratio 0.29 0.39 0.75

Q uick Ratio 0.22 0.36 0.71

Leverage Ratio

Debt to Equity Ratio 3.16 3.718 2.846

Total Debt to Assets 0.61 0.61 0.603

Debt Ratio to Total Capitalization 0.08 0.68 0.74

Coverage Ratio 0.93 (0.79) 1.298Activity/Turnover Ratio

Receivable Turnover Ratio 5.5 7.5 10.7

Average Collection Period 66 49 34

Inventory Turnover Ratio 20.5 21.8 13.7

Inventory Turnover Ratio Days 17 17 26

Operating Cycle 83 66 60

Assets Turnover Ratio 0.26 0.61 0.195

Gross Prof it Margin 7.6 (0.18) 14.1

Net Prof it Margin 2.87 (10.8) 4.77

Return on Investment 0.75 (2) 0.93

Return on Equity 4.5 (11) 4.3




Interpretation of the ratios

2009 Interpretation of the ratios

1. Current ratio:

The company is not in a good liquidity position, there eff icient asset do not meet the liabilities.

As the ratio is 0.29.But it also means the resources are not used by the company eff iciently

which means resources are idle.

2. Q uick ratio:

It is also not highly liquid because inventory is deducted f rom the current asset so, it do not

becomes more liquid.

3. Debt to equity ratio:

In this ratio the percentage of the debts is 3.16% in share holder equity which means company

pref er borrowing.

4. Total debt to asset ratio:

In this ratio the percentage of the debt in the total asset is 61%.It is anot a good sign for the

company that the asset have high debt .Therefore element of the risk is there.

5. Debt ratio to total capitalization:

This ratio relates to the capital structuring. As the ratio is 8% which means that there are 8%

long term debts in the total capitalization.

6.

Coverage ratio: Coverage ratio relates that how many times a company can meet its f inancial cost (interest

expense).As the ratio is 93 times which means that a company meet its interest/f inancial cost

93 times.

7. Receivable turnover ratio:

This ratio relates that how fast account receivable converting into cash as the ratio is 5.5 which

mean it is below the benchmark average.




8. Average collection period:

The ratio is 66 days, it is a very longer period for the collection, which means that the the

acceptance standard s of the company are not good towards the account receivables.

9. Inventory turn over ratio:This ratio means that how many times the inventory converted into sales. As the ratio is 20.5,

which means that the sale is rapid.

10. Inventory turnover ratio in days:

The ratio is 17 which means that the demand of stock is too much high.

11. Operating cycle:

The operating cycle of the company is 83.There we notice two things ,as in the previous two

ratio s inventory turnover ratio is 20.5 & the average collection period is 66 which means that

their inventory very rapidly out of stock but there collection method are not so good thats why

their operating cycle is lengthy.

12. Asset turnover ratio:

The ratio is 26% which means that they does not use their assets well.

13. Gross profit margin:

Gross prof it relates to the operating expense .As the gross prof it is 7.6% of the sales & our

operating expense are 55% which means the cost f the company is not eff iciently controlled.

14. Net profit/loss margin:

Net prof it/loss margin relates to the overall expenses of the business. As the net prof it/loss are

(78.99)% of the sales.

15. Return on investment:

This ratio is 0.75% which means that company is in a good position & it is below the benchmark

average.

16. Return on equity:

This ratio increases the overall performance as it 4.5% & it is the above the industryaverage(19%) which means investors will not invest their investment.





1. Current ratio:

The company is not in a good liquidity position, there eff icient asset do not meet the liabilities.

As the ratio is 0.39.But it also means the resources are not used by the company eff iciently

which means resources are idle.

2. Q uick ratio:

It is also not highly liquid because inventory is deducted f rom the current asset so, it do not

becomes more liquid.


In this ratio the percentage of the debts is 3.718% in share holder equity which means company

pref er borrowing.

4. Total debt to asset ratio:

In this ratio the percentage of the debt in the total asset is 61%.It is anot a good sign for the

company that the asset have high debt .Therefore element of the risk is there.


This ratio relates to the capital structuring. As the ratio is 68% which means that there are 68%

long term debts in the total capitalization.

6. Coverage ratio:

Coverage ratio relates that how many times a company can meet its f inancial cost (interestexpense).As the ratio is (.79) times which means that a company is not able to meet its

interest/f inancial cost.


This ratio relates that how fast account receivable converting into cash as the ratio is 7.5 which

mean it is below the benchmark average.

8. Average collection period:

The ratio is 49 days, it is a very longer period for the collection, which means that the the

acceptance standard s of the company are not good towards the account receivables.

9. Inventory turn over ratio:

This ratio means that how many times the inventory converted into sales. As the ratio is 21.8,

which means that the sale is rapid.


The ratio is 17 which means that the demand of stock is too much high.





The operating cycle of the company is 66.There we notice two things ,as in the previous two

ratio s inventory turnover ratio is 21.8 & the average collection period is 66 which means thattheir inventory very rapidly out of stock but there collection method are not so good thats why

their operating cycle is lengthy.

12. Asset turnover ratio:

The ratio is 61% which means that they use their assets very well.


Gross prof it relates to the operating expense .As the gross prof it is (18%) of the sales & our

operating expense are 97% which means the cost f the company is not eff iciently controlled.

14. Net profit/loss margin:

Net prof it/loss margin relates to the overall expenses of the business. As the net prof it/loss are

(141%) of the sales.


This ratio is (2)% which means that company is not in good position & it is below the benchmark

average.


This ratio increases the overall performance as it (-11%) & it is the above the industry

average(+19%) which means investors will not invest their investment.


1. Current ratio:

Current ratio is 0.75, in this year the company is not highly liquidity but there resources are

under estimate.

2. Q uick ratio:

This ratio is 0.71, so it is not highly liquid.


This ratio 2.8% which means that there is 2.8% debt in shareholder equity.




4. Total debt to asset:

This ratio is 60.3% which means that assets are 60.3% f inance by debts.


There are 74% long term debts in a capital structuring.

6. Coverage ratio:

It is 1.298 times the company is not in a very good position as it can meet 1.298 times its

f inancial costs.


This ratio is 10.7 this is below the benchmark average.

8. Average collecting period:

This ratio is 34 which mean that the acceptance standards are not good towards account

receivable.

9. Inventory turnover ratio:

This ratio is 13.7, it is not much high, this means that sales is not much rapid.


It is 26 which means that demand of stock is high but company is not meeting the market

requirments.


The operating cycle is 60 days. It is again not eff icient for the company.

12. Asset turn over ratio:

This ratio is 19.5% which means that assets are not eff iciently used.


This ratio is 14.1%, here again the operating expense of the company is handled very well.

14. Net profit margin:

It is 4.7% it includes overall expense of the business. This prof it is very low as compared to

benchmark.


This ratio 0.93% which means company is not in good position it is below the benchmark

average.





The ratio is 4.3% which is below the benchmark average (20%) which can not help to attract the

investors.

TREND ANALYSIS

Trend analysis of 2009, 2008, 2007

1. Current ratio:

As in 2009 the ratio is 0.29 & in 2008 the ratio is 0.39 & in 2007 the ratio is 0.75. From the

f igure year of 2007 is the most liquid year for the company. Then 2009 & then 2008

2. Q uick ratio:

In 2009 it is 0.22 & in 2008 it is 0.36 & in 2007 it is 0.71. From the f igures the 2007 is the mostliquid year the 2009 &2008. It means that the company liquidity is high in 2007, decreases in

2008 & then increases in 2009.


In 2009 it is 3.16% & in 2008 it is 3.718% & in 2007 it is 2.846%, it means the debts are lowest in

share holder equity in 2007, it increases in 2008 & decreases in 2009 again.

4. Total debt to asset:In 2009 it is 61% & in 2008 it is 61% & in 2007 it is 60%. It is clear f rom the f igures the assets are

f inanced by debts lowest in 2007 & then percentage of debts in total assets increases in 2008 &

f urther increases in 2009 upto some extent.


In 2009 it is 8%, in 2008 it is 68% & in 2007 it is 74%. It means that the percentage of the long

term debts in the capital structuring is minimum in 2009, it increases in 2008 & it f urther

increases in 2007.

6. Coverage ratio:

In 2009 it is 93 times & in 2008 (79) times & in 2007 is 129.8 times. It is lowest in 2008 itincrease in 2008 & it again increase in 2007.


It is 5.5 in 2009 & in 2008 it is 7.5 & in 2007 it is 10.7 .It is highest in 2007, it is the decreases in

2008 & f urther decreases in 2009.




8. Average collecting period:

It is 66 days in 2009 & 49 in 2008 & 34 days in 2007.So, 2007 is the most eff icient year as the

number of days is minimum & then it increases in 2008 & it f urther increases in 2009.

9. Inventory turnover ratio:

It is 21 in 2009, it is 22 in 2008 & it is 13.7 in 2007. The growth of the sales is lowest in 2007 &

then it increases in 2008 & remains constant aprox. in 2009.


It is 17 days in 2009, it is 17 days in 2008 & it is 26 days in 2007. This shows that the inventory

turnover is highest in 2008 & 2009 then lowers in 2007 also. But the expansion of the days

def inite vice versa.


It is 83 days in 2009, 66 days in 2008 & 60 days in 2007. It is maximum in 2009 & then decreases

in 2008 & 2007. But the most eff icient year is 2007.

12. Asset turn over ratio:

It is 26% in 2009, it is 61% in 2008, it is 20% in 2007.It is lowest in 2007 & then increases in 2008

& then decreases in 2009.

13. Gross profit margin:It is 7.6% in 2009, it is (18%)% in 2008, & 14.1% in 2007.There is almost same trend accepted in

2008 as it is in loss.

14. Net profit margin:

It is (2.87)% in 2009, it is (10.8%) in 2008 & it is 4.77% in 2007.It is highest in 2007, it then

decreases in 2008 & then it increases in 2009.

15. Return on investment:It is 0.75% in 2009, (2%) in 2008, & 0.93% in 2007. It is best in 2007 it then decreases in 2008 &

increases in 2009. It means that 2007 is the most eff icient year for the company.


It is (4.5%) in 2009, it is (11%) in 2008 & it is 4.3% in 2007.There is almost the trend accepted in

2007, the return on equity in 2007 & 2009 is maximum which is the most attracted years for the

investors .




COMMON SIZE ANALYSIS

Dewan Cement Ltd.

Common Size Analysis

Balance Sheet Common Size %

Assets 2009 2008 2007 2009 2008 2007

NON - CURRENT ASSETS (Rs. in000)

Property, plant and equipment 20015133 19927245 19304428 92% 92% 87%

Intangible asset 70003 74369 28507 0.3% 0.34% 012%

Long-term loans 1587 641 1062 0.007% 0.0029% 0.0047

Total Non Current Assets 20086723 20002255 19333997 92.307% 92.34% 87.12%

CURRENT ASSETS

Stores and spares 379892 397500 683759 1.75% 1.83% 3.08%

Stock-in-trade 384169 127802 302825 1.7% 0.59% 1.36%

Trade debts 316485 715855 510335 1.46% 3.3% 2.3%

Loans and advances 149209 130715 110071 0.6% 0.6% 0.49%

Trade deposits and short-term prepayments 27978 32288 95333 0.12% 0.15% 0.28%

Short Term Investment 2172 39143 9161 0.09% 0.18% 0.42%Other receivables 19959 4656 62202 0.01% 0.021% 0.413%

Advance Tax 107826 17760 16328 0.49% 0.082% 0.087%

Cash and bank balances 122311 132572 224537 0.56% 0.61% 1.01%

Total Current Assets 1510001 1608832 2815543 7.69% 7.66% 13.04%

Total Assets 21596724 21611087 22187512 100.00% 100.00% 100.00




Balance Sheet Common Size %

EQ UITY AND LIABILITIES 2009 2008 2007 2009 2008 2007

SHARE CAPITAL AND RESERVESshare capital 3573750 3573750 3573750 16.54% 16.5% 16.1%

Capital Reserves 648287 334720 1130675 3.00% 3.34% 5.09%

Inappropriate prof its 4007712 4014940 4090668 18.5% 18.57% 18.43%

Total Equity 8229749 8323410 4704425

NON-CURRENT LIABILITIES

Log term f inancing 1701547 2275462 2430054 7.8% 10.5% 10.9%

Def erred Employee Benef its 1750444 2065797 2192143 8.1% 4.2% 9.8%

Debentures - 3850000 4110825 - 17.81% 18.52%

Mark up payable - - 141252 - 9.6% 0.636%

Long term deposits 923029 922894 861539 4.2% 0.4% 3.88%

Liabilities against assets 31494 88949 120843 0.14% 17.8% 0.54%

CURRENT LIABILITIES

Trade and other payables 1624625 1649766 1305183 7.5% 7.6% 5.8%

Provision for Taxation - - - - - -

Short term redemable capital - - 497695 - - 2.24%

Short term borrowing 660875 348021 248644 3% 3.46% 1.12%

Markup payable 1042708 555916 345134 4.8% 2.57% 1.55%Sales tax payable 35339 16850 14743 0.16% 0.077 0.066%

Current portion of borrowing 1746914 1114022 1124364 8% 5.15% 5.06%

Total Liabilities 5110461 4084575 3535763 100.00% 100.00% 100.00




Profit and Loss Account Common Size %

2009 2008 2007 2009 2008 2007

Sales net5

6825

7145

9800243

295

03

100.00% 100.00% 100.00Cost Of Sales 5249197 4706326 (3718979) (92.3%) (102.3%) (85.8%

Gross Profit/Loss 433374 (108324) 610524 7.6% (2.35%) 14.10%

Distribution Cost 192475 94741 22210 (3.38%) (2.06%) (0.51%

Administrative Expenses 157534 246815 136223 (2.77%) (5.36%) (30.8%

Other Operating Expense 27609 88325 17745 (0.48%) (1.92%) (0.40%

Other Operating Income 30945 281025 283751 (0.54%) (6.11%) (6.5%

Operating Profit/Loss (55756) (538205) 718097 (0.98%) (11.7%) 16.58%Finance Cost 463191 325142 553115 (8.1%) (7.07%) (12.77%

Profit/Loss Before Texation (376490) (582322) 164982 (6.6%) (12.66%) 3.8%

Taxation Net 213282 83185 41624 3.7% 1.8% 0.96%

Profit/Loss for the Year (163208) (499137) 206606 (2.87%) (10.85%) 4.77%

Interpretations:

After completing common size analysis we came to know that companys non-current

assets increases during the time of 2007-2009 and its current assets decreases in same spane of

time. Non-current liabilities of the company also decreases which is a good sign for f inancial

health but current liabilities increases which is not a good sign. Now we can see that companys

current assets had decreased and cuurent liabilities had increased which shows that companys

liquidity is not good.

In prof it and loss statement we can see that cost of goods sold had increased during the time of

2007-2009 it means companys overall external expenses had increased. In the result Gross

Prof it had decreased. Administrative expenses had been controlled by the company durin the

same spane of time. Distribution cost had also increased which resulted in shrinkage of prof it

which is currently converted into loss.




INDEX ANALYSIS

Dewan Cement Limited

Index Size Analysis

BALANCE SHEET Index Size %

Assets 2009 2008 2007 2009 2008 2007

NON - CURRENT ASSETS

Property, plant and equipment 20015133 19927245 19304428 103.68% 103.22% 100.00%

Long-term investments 70003 74369 28507 179.6% 140.39% 100.00

Long-term loans 1587 641 1062 149.4% 60.35% 100.00%

Total Non Current Assets 20086723 20002255 19333997 432.68 303.96% 100.00

CURRENT ASSETS

Stores and spares 379892 397500 683759 55.55% 58.13% 100.00%

Stock-in-trade 384169 127802 302825 126% 42.20% 100.00

Trade debts 316485 715855 510335 62% 140.27% 100.00

Loans and advances 149209 130715 110071 135% 118.75% 100.00

Trade deposits and short-term prepayments 27978 32288 95333 29% 33.8% 100.00

Other receivables 2172 39143 9161 32.08% 62.92% 100.00%Short Term Investment 19959 4656 62202 23% 50.8% 100.00

Advance Tax 107826 17760 16328 - 108.7% 100.00

Cash and bank balances 122311 132572 224537 53.54% 59.04% 100.00%

Total Current Assets 1510001 1608832 2815543 53.63% 57.14% 100.00

Total Assets 21596724 21611087 22187512 97.3% 97.4% 100.00




BALANCE SHEET Index Size %

EQUITY AND LIABILITIES 2009 2008 2007 2009 2008 2007

SHARE CAPITAL AND RESERVES

share capital 3573750 3573750 3573750 100% 100% 100.00%

Capital Reserves 648287 334720 1130675 57% 64.9% 100.00%

Inappropriate prof its 4007712 4014940 4090668 97% 98.14% 100.00%

Total Equity 8229749 8323410 4704425 174.93% 176.92% 100.00%

NON-CURRENT LIABILITIES

Log term f inancing 1701547 2275462 2430054 70% 93.63% 100.00%

Def erred Employee Benef its 1750444 2065797 2192143 79% 94.2% 100.00%

Debentures - 3850000 4110825 - 93.65% 100.00%Mark up payable - - 141252 - - 100.00

Long term deposits 923029 922894 861539 107% 107% 100.00

Liabilities against assets 31494 88949 120843 26% 65.96% 100.00%

CURRENT LIABILITIES

Trade and other payables 1624625 1649766 1305183 124% 126.4% 100.00%

Provision for Taxation - - - - - -

Short term redemable capital - - 497695 - - 100.00%

Short term borrowing 660875 348021 248644 132% 300.8% 100.00%

Markup payable 1042708 555916 345134 302% 161.07% 100.00%

Sales tax payable 35339 16850 14743 239% 114.29% 100.00%

Current portion of borrowing 1746914 1114022 1124364 155% 99% 100.00%

Total Liabilities 5110461 4084575 3535763 144.5% 115.52% 100.00%




PROFIT AND LOSS ACCOUNT Index Size %

2009 2008 2007 2009 2008 2007

Sales net 5682571 4598002 4329503 131% 106% 100.00Cost Of Goods Sold (5249197) (4706326) (3718979) 141% 126.54% 100.00

Gross profit 433374 (108324) 610424 10% (20.54%) 100.00

Distribution Cost 192475 94741 22210 866% 267% 100.00

Other Operating Expenses 27609 88325 17745 155% 497.7% 100.00

Administration and general expenses 157534 246815 136223 115% 181.18% 100.00

(377618) (429881) (176178)

Operating Profit/Loss 55756 (538205) 434346 12.8% (123.9%) 100.00

Other Operating Income 30945 281025 283715 10% 99.03% 100.00

Finance Cost (463191) (325142) (553115) 83.7% 58.78% 100.00

EBIT/ Loss Before Tax (376490) (582322) 164982 (228.2%) (352.96) 100.00

Taxation 213282 83185 41624 512% 199.84% 100.00

Profit/Loss for the Year (163208) (499137) 206606 (78.99%) (241.58%) 100.00

Interpretations:

After completing Index analysis (taking 2007 as base year). we came to know that

companys non-current assets increases during the time of 2007-2009 and its current assets

decreases in same spane of time. Non-current liabilities of the company also decreases which is

a good sign for f inancial health but current liabilities increases which is not a good sign. Now we

can see that companys current assets had decreased and cuurent liabilities had increased

which shows that companys liquidity is not good.

Inpr

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at cost of good

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ng the

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of 2007-2009 it means companys overall external expenses had increased. In the result Gross

Prof it had decreased. Administrative expenses had been controlled by the company durin the

same spane of time. Distribution cost had also increased which resulted in shrinkage of prof it

which is currently converted into loss. As we can see in the results the margin of loss is very

high which shows that the company is currrently in deep trouble. Company must start taking




notice of its cost of the goods and operating expenses so that they can bring the company back

on track.

Comparison with Benchmark

Dewaan Cement Limited Lucky Cement Limited

Years Years

Ratios 2009 2008 2007 Average 2009 2008 2007 Average

Liquidity Ratio

Current Ratio 0.29 0.39 0.75 0.4766 0.86 1.08 0.85 0.93

Q uick Ratio 0.22 0.36 0.71 0.43 0.73 0.991 0.75 0.823

Leverage Ratio

Debt to Equity Ratio 3.16 3.718 2.846 3.24 0.65 0.84 1.75 1.11

Total Debt to Assets 0.61 0.61 0.603 0.607 0.39 0.46 0.64 0.50Debt Ratio to Total Capitalization 0.08 0.68 0.74 0.5 0.26 0.42 1.07 0.58

Coverage Ratio 0.93 (0.79) 1.298 0.479 5.83 24.27 3.55 11.36

Activity/Turnover Ratio

Receivable Turnover Ratio 5.5 7.5 10.7 7.9 20.78 23.54 26.27 23.53

Average Collection Period 66 49 34 50 18 15 14 16

Inventory Turnover Ratio 20.5 21.8 13.7 18.6 17.33 18.18 16 17.17

Inventory Turnover Ratio Days 17 17 26 20 21 20 23 21

Operating Cycle 83 66 60 70 39 35 37 37

Assets Turnover Ratio 0.26 0.61 0.195 0.355 0.69 0.5 0.48 0.56

Gross Prof it/Loss Margin 7.6 (0.18) 14.1 7.173 0.37 0.25 0.3 0.306

Net Prof it/Loss Margin 2.87 (10.8) 4.77 (1.053) 0.117 0.16 0.20 0.16

Return on Investment 0.75 (2) 0.93 (0.106) 14.21 9.84 9.67 11.24

Return on Equity 4.5 (11) 4.3 (0.733) 0.19 0.14 0.27 0.2

Intrepretation

Liquidity Ratio

Current Ratio:

The Liquidity position of DCL is poor than LCL because LCL utilized there resources very well

and the resources of the DCL are idle to more over we also analysis the risk factor in the DCL is

high but it is low in LCL.




Q uick Ratio:

As it is mentioned in the current ratio that DCL is not in good liquidity position as compared to

the LCL and it is almost as the current ratio except it is not liquid.

Leverage Ratio

Coverage Ratio:

DCL have poor f inancial resources as compared to the LCL and it can not meet its interest

expense cost many times than LCL which means that in DCL there are more chances of

insolvency as compared to the LCL.

Activity/Turnover Ratio

Receivable Turnover Ratio:

This ratio of the DCL is not up to the mark as it is below the benchmark average but LCL is in a

better edge.

Average Collection Period:

The collection procedure of the DCL is not eff icient thats why it is high but on the other hand

the collection procedure of the LCL is better.

Inventory Turnover Ratio:

It is clear f rom the inventory turn over ratio that demand of the inventory of OGDCL is not high.

Sales are not much rapid but it is opposite in LCL.

Inventory Turnover Ratio Days:

As it is stated in the previous ratio that demands of the inventory of DCL is not high as

compared to LCL.




Operating Cycle:

This ratio is lower in DCL than LCL , which means that the collection procedures are better in

LCL and inventory turn over ratio duration is higher in LCL, so there is lesser chance of

inventory shortage in LCL thats why this ratio is lower in DCL.

Assets Turnover Ratio:

This ratio tells us that DCL does not utilized its assets very well thats why they do not

contribute a major portion to generate sales but in LCL ratio is high and they contribute greater

in generation of sales

Gross Profit Margin:

DCL does not handles very well its operating cost thats why gross prof it margin is poor. In LCL

the operating cost is managed well thats why it is high and we noticed that in 2008 & 2009 DCL

suff ered loss.

Net Profit Margin:

Again the same situation DCL does not handles its overall expense very eff iciently thats why it

is low as compared to LCL and DCL suff ered loss in 2008 & 2009 as it is mentioned.

Return on Equity:

The overall performance of DCL is not very well as compared to the LCL thats why the return

on equity is lower in DCL. There are good opportunities for the investors in LCL but it doesnt

mean that DCL is performing not well it is also performing good.




CONCLUSION

After having taking into account all the ratios, namely short term liquidity, long term debt

paying ability, prof itability ratios and last but not the least the investors point of view, we have

come to the conclusion that the company does not holds great attraction for the investors, the

reason being that its short term liquidity is not good to say the least, its long term debt paying

ability does not looks good. It is also not doing well on its prof itability f ront, and it is running a

huge risk by f inancing its assets by excessively putting the borrowed money to use. So all said

and done the f uture of the company does not looks promising given its performance and its

track record on all f ronts.

Documents

Final Project of Business Finance