financial statement analysis project on sugar mill

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National University of Modern Languages

Sector H-9 ISLAMABAD

Department of Management Science

Afs Project

Kohinoor Sugar mill ltd

5/12/11

SUBMITTED TO: Madam iram qazi

SUBMITTED BY: Adeel Azher

If u want to download this project then call me at 03458014643 or send me a text1


Kohinoor Sugar Mills Limited

Introduction

Kohinoor Sugar Mills Limited is one of the first Sugar Factories

established in Pakistan since the country’s independence. A Saigol

Family project, KSML is a public limited company, listed on the

Karachi and Lahore Stock Exchanges. Kohinoor Sugar Mills is

located in Jauharabad, District Khushab in the Punjab province. The

plant has the capacity of crushing over 5,000 Metric Tons of Cane per

Day (TCD). The Factory produces over 40,000 tons of sugar every

year.

Statement of Ethics and Business Practice

Code of ethics is a pre-requisite for all directors and employees

of Kohinoor Sugar Mills Limited. We endeavor to have fully groomed

employees committed to carry out honestly activities assigned to

them. Our aim is to have high standard of excellence for the products

and for all those involved with our Company

VISION STATEMENT

“To become a market leader in the Industry setting out high

quality standards for the Company and others to follow”



MISSION STATEMENT

To produce/manufacture quality sugar and molasses by maintaining a

high standard of efficiency and staying competitive to ensure

customer satisfaction

Ratio Analysis

Now we shall find out the ratios of the Kohinoor Sugar Mills Limited to

check the condition of the firm. We will find out the Following Ratio

Balance Sheet Income Statements

Liquidity Ratio Profitability Ratio

Leverage ratio Coverage Ratio

Efficiency Ratio

Market Value Ratio

Liquidity Ratio

Those ratios which shows how quickly a firm meets its short term

obligations. Current liability

Following are the liquidity Ratio

Current Ratio

Quick Ratio

Cash Ratio

Current Ratio

The current ratio is obtained by dividing the current assets by current

liabilities. Current assets normally includes: cash, marketable

securities, account receivable and inventories.



Formula

The formula of current ratio is:

Current ratio = Current assets / Current liabilities

Computation

Years Current Assets Current Liabilities Current Ratio2005 227,173,249 209,954,058 1.082006 390,666,841 457,793,528 0.85

Analysis



The firm current ratio is in poor condition so it means that they need

financing to cover up their current obligations.

Quick Ratio.

The quick ratio can be calculated by deducting the inventories and

prepayments from the current assets and then dividing the remainder

by current liabilities. Inventories are typically the least liquid of the

firm current assets hence they are the current assets on which losses

are most likely to occur in a bankruptcy.

Formula

The formula of Quick ratio is:Quick ratio= Current assets-inventories-prepayments / Current

liabilities

2005Quick Asset= 227,173,249- 90,623,529- 66,437,296=70,112,4242006Quick Asset= 390,666,841-84,466,516-218,956,788=87,243,537

Computation

Years Quick Assets Current Liabilities Quick Ratio

2005 70,112,424 209,954,058 0.33

2006 87,243,537 457,793,528 0.19

Analysis

We can see that in 2005 we have current rati of 0.33 that means we

have 0.33 quick assets to pay a 1 current liability. But in 2006 it

decrease from 0.33 to 0.19 which show the performance of company

is bad.

Cash Ratio



The cash ratio gives the information about the coverage of the current liabilities

through cash which is the liquid. It should be 1: 1 as this is considered as

satisfactory. The liquidity is calculated by adding cash and marketable securities.

The Cash Ratio of Kohinoor Sugar Mills Limited is:

Formula

The formula of working capital is:

Cash Ratio = (Cash + Marketable Securities) / Current liabilities

Computation

Years Cash + MKT Securities Current Liabilities Cash Ratio

2005 2,909,458+3,839,179=6,748,637 209,954,058 0.032

2006 9,553,415+369,790=9,923,205 457,793,528 0.022

ANALYSIS

The cash ratio tells us about the covering of short term obligation with

cash and cash equivalent it should the firm quick availability of the

cash and cash equivalent. This shows firm quick liquidity.



LEVERAGE RATIO

Those ratios which show extend to which it is financed by Debt.

Following are the leverage ratio

debt to equity

Total debt to total asset

Total debt ratio

Debt to equity



This ratio asses the extent to which the firm is using borrowed money. This

measures how much effective the firm is in usage of the debt. This ratio tells the

amount of debt taken against each rupee of equity.

The debt to equity ratio of Kohinoor Sugar Mills Limited is:

Formula

The formula of is:Debt to equity = total debt / equity

Computation

Years Long Term Debt Shareholders' Equity Debt to Equity

2005 165,098,022 94,867,800 1.74

2006 468,940,245 94,867,800 4.94

Total debt to total asset

The total debt to total asset generally called debt ratio, measures the percentage

of the funds provided by creditors. The creditors prefer low percentage because it

provides greater cushion to the creditors losses in the event of the liquidation.

The total debt to total assets of Kohinoor Sugar Mills Limited is:

Formula

The formula of is:

Total debt to total asset = total debt / total assetTotal debt= Current liabilities + LT Debt

Computation

Years Total Debt Total Assets Debt to Total Assets

2005 375,052,080 911,218,836 41.16%

2006 626,733,773 1,307,811,430 47.92%

Analysis

The debt ratio is increase in 2006 by 6 percent that means we have

more assets to pay off the debt.



Total debt ratio

This ratio tells about how much firm’s capital is financed by the debt. It should be

low because of the risk factor that effect on the firm’s reputation. It should be

maximum of 50% or less.

The total debt to total capitalization ratio of Kohinoor Sugar Mills Limited is:

Formula

The formula of is:

Total debt ratio = total debt / total debt + EquityComputation

Years Current liabilities + LT Debt Total Debt + Total Equity Debt Ratio

2005 375,052,080 478,256,327 78.42%

2006 626,733,773 729,938,020 85.86%

Analysis

That means for paying the debt we have 78% owner equity and we

have a 22% liabilities. And in 2006 we have 85 % are owner equity

and 15 percent debt.



Profitability ratios

Profitability is the net result of the number of policies and decisions. The ratios

examined thus far provide useful clues as tot the effectiveness of the firms

operations.

The profitability ratios are:

Net profit margin

Gross profit margin

Operating profit Margin

Basic earning power

Return on total assets



Net Profit Margin

Net profit margin is calculated by divided EAT by sales. it is the percentage of

sales which is the profit. It should be high as it means that the cost of incurring

production is low.

The Kohinoor Sugar Mills Limited net profit margin is:

Formula

The formula of ratio is:

Net profit margin = net profit after taxes / net sales

Computation



Years Net Profit After Taxes Net Sales Net Profit Margin

2005 54,081,708 852,372,071 6.34%

2006 8,141,611 913,370,379 0.89%

ANALYSIS

This ratio tells us the percentage of sales that is the profits this ration

also provide information about the profitability of the firm. The more

the net profit margin the more is the profitability of the firm. In case of

Kohinoor sugar the firm has maximum profit which means that the

firm profitability is good.

Gross Profit Margin

The gross profit margin is calculated by dividing gross profit by sales.

This the percentage of sales which is the gross profit as percentage

of sales. The difference of this percentage from 100% gives the

percentage of cost of goods sold.

Formula


Gross profit margin = Gross profit / net sales

Computation

Years Gross Profit Net Sales Gross Profit Margin

2005 135,201,515 852,372,071 15.86%

2006 137,641,270 913,370,379 15.07%

Analysis



This ratio tells us about the percentage of gross profit from the sales

this also shows the profitability of the firm after the cost of sales the

difference between the gross profit margin and the sale is the

percentage of the cost of sales. in case of the Kohinoor sugar the

gross profit margin is good.

Operating Profit Margin

The operating profit margin is calculated by dividing operating profit

by sales. This the percentage of sales which is the operating profit as

percentage of sales. The difference of this percentage from 100%

gives the percentage of cost of goods sold and operating expenses

incurred.

Formula


Operating profit margin = Operating profit / net sales

Computation

Years Operating Profit Net Sales Operating Profit Margin

2005 92,832,293 852,372,071 10.89%

2006 86,517,309 913,370,379 9.47%

Analysis

This ratio tells us about the operating profitability of the company.

This ratio gives the percentage of sales that is the operating profit.

The difference between the operating margin and the gross profit



margin is the percentage of the operating expenses. In Kohinoor

sugar the operating profit is negative in second year.

Return on total assets

The ratio of net income to total assets measures the return on total assets. This

shows that how much of the profit is due to assets or how much is the profit on

assets. It should be high in manufacturing oriented firm.

The Kohinoor Sugar Mills Limited return on assets

Formula


Return on asset = net profit after taxes / Total assetsComputation

Years Net Profit After Taxes Total Assets Return on Total Assets

2005 54,081,708 911,218,836 5.94%

2006 8,141,611 1,307,811,430 0.62%

Analysis

This ratio tells us about the return that would the total capital employed

generate in the firm. The total capital includes the all form of debt and equity.

This ratio gives us the return on the total capital employed. In case of the

Kohinoor sugar in early year it generate the negative return but by time the

return become positive.

Basic earning power

The basic earning power ratio is calculated by dividing earning before interest

and taxes this ratio shows the raw earning power of the firm assets before the

influence of taxes and leverages.



The Kohinoor Sugar Mills Limited basic earning power is:

Formula

The formula of ratio is:Basic earning Power = EBIT / Total assets

Computation

Years EBIT/Operating Profit Total Assets Basic Earning Power

2005 92,832,293 911,218,836 10.19%

2006 86,517,309 1,307,811,430 6.62%The basic earning power ratio is calculated by dividing earning before interest

and taxes this ratio shows the raw earning power of the firm assets before the

influence of taxes and leverages.

The Kohinoor Sugar Mills Limited basic earning power is:

Formula

The formula of ratio is:Basic earning Power = EBIT / Total assets

Computation

Years EBIT/Operating Profit Total Assets Basic Earning Power

2005 92,832,293 911,218,836 10.19%

2006 86,517,309 1,307,811,430 6.62%

Efficiency Ratio or turnover Ratio

That ratio which show how efficiently a company is using its assets

following are some efficiency Ratio.

Receivable turnover

Payable turnover

Inventory Turnover

Receivable turnover



The receivable turnover is defined as the sales divided by receivables. This ratio

shows how many times in a year the receivable received by the customer it

shows how much the firm is efficient tin collecting the account receivables.

The Kohinoor receivable turnover is:

Formula

The formula of receivable turnover is:

Receivable Turnover = Sales / Receivables Computation

Years Sales Receivables Receivable Turnover (Times)

2005 852,372,071 39,003,866 22

2006 913,370,379 44,906,524 20

Average collection period

It is also called average collection period it is calculated by dividing the number of

days in year by receivable turnover. This ratio shows after sales how many days

after which the account receivable are received.

The Kohinoor Sugar Mills Limited days sales outstanding are:

Formula

The formula of receivable turnover is:

Receivable Turnover in days = 365 / Receivables turnover

Computation

Years Days in Year Receivable Turnover Receivable Turnover (Days)

2005 360 22 16

2006 360 20 18

Inventory turnover ratio



The inventory turnover ratio is defined as CGS divided by the inventories. This

ratio shows that in a year how many times the inventory turn in to the sales. This

shows that how much firm is efficient in managing and recycling inventory in a

year either it is a lot of inventory without circulating or not.

The Kohinoor Sugar Mills Limited the inventory turnover ratio is:

Formula

The formula of inventory turnover is:

Inventory Turnover = cost of good sold / inventory

Computation

Years Cost of Sales Inventories Inventory Turnover (times)

2005 717,170,556 157,966,407 4.54

2006 775,729,109 230,242,065 3.37

Inventory turnover days

The inventory turnover days is defined as the number of days in year divided by

inventory turnover. This shows that after how many days the inventory is

converted in to cash or sales.

The Kohinoor Sugar Mills Limited inventory turnover in days is:

Formula

The formula of inventory turnover in days is:

Inventory Turnover in days = 365 / inventory turnover

Computation

Years Days in Year Inventory Turnover Inventory Turnover (Days)

2005 360 4.54 79

2006 360 3.37 107



The payable turnover means in a year how many time they pay the credits of

their purchases which means after credit purchases how many times a year they

pay the credits.

The Kohinoor Sugar Mills Limited payable turnover is:

Formula


Payable Turnover = Purchases / Account payable

Computation

Years Cost of Sales Account Payable Payable Turnover

2005 717,170,556 39,612,353 18.10

2006 775,729,109 39,916,147 19.43

Average collection period

The payable turnover in days means after credit purchases how many days after

which the credit are paid this shows the firm ability to manage and release debts.

It should be greater then the receivable turnover in days.

The Kohinoor Sugar Mills Limited payable turnover in days is:

Formula


Payable Turnover in days = 365 / payable turnover

Computation

Years Days in Year Payable Turnover Payable Turnover (Days)

2005 360 17.97 20

2006 360 10.58 34


financial statement analysis project on sugar mill

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