Reports orignal

Financial Analysis Statements
FAS’ 15
Presented to
Mr. Mian Saqib Mehmood
Department of Commerce
Project is submitted in partial fulfilment of the course Analysis if
Financial Statements (AFS)
Presented by
Ahmad Raza 13024854-072
Muhammad Abdullah 13024854-107
Muhammad Faran 13024854-108
Faculty of Management and Administrative Sciences
Hafiz Hayat Campus
University of Gujrat, Gujrat

Analysis Of Financial Statements 2015
NISHAT Group Page 1
Table of Contents
Topics Page #
i. Acknowledgement…………………………………………… 2
ii. Dedication …………………………………………………… 3
iii. Company Description………………………………………... 4
iv. Vision of Company………………………………………….. 4
v. Mission of Company………………………………………… 4
vi. Organizational History………………………………………. 5
vii. Organizational Chart ………………………………........ 5
viii. Products…………………………………………………….... 6
ix. Introduction to Financial Ratios Analysis…………………… 7
x. Types of Ratios………………………………………………. 8
xi. Horizontal Analysis………………………………………….. 11
xii. Vertical Analysis……………………………………….......... 12
xiii. Liquidity Ratios Analysis……………………………………. 14
xiv. Activity Ratios Analysis……………………………………... 14
xv. Profitability & Debt Ratios Analysis………………………… 16
xvi. DuPont Analysis……………………………………………… 17
xvii. Market Ratios Analysis………………………………………. 18
xviii. Overall Analysis as Investor ……………………………….. 23
xix. Cross Sectional Analysis…………………………………… 23
xx. Annexure……………………………………………………. 24

NISHAT Group Page 2
ACKNOWLEDGEMENT
First of all We thankful to Almighty Allah who gave us the strength, patience, courage and
enthusiasm needed to write and complete this project.
We are highly indebted to “Sir Mian Saqib Mehmood” for his guidance and constant
supervision as well as for providing necessary information regarding the project & also for
his support in completing the project.
We would like to express our gratitude towards our parents who supported us financially and
encouraged morally, for their kind co-operation and encouragement which helped our team in
completion of this project.
Our thanks and appreciations also go to my fellows in developing the project and people who
have willingly helped us out with their abilities.
We have a debt of gratitude to all my teachers who taught us throughout our academic
session. We learnt a lot from this “Analysis of financial statements” program and this would
guide us in our practical life.
This report is the result of help, which we received from the respected Sir Mian Saqib
Mehmood who appreciated our efforts and informed us about our weaknesses and strength.
This project enabled us to draw a line of distinction between theory and practical and we
would like to give all credit to “Sir Mian Saqib Mehmood” for giving us such opportunity
and to encourage.

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DEDICATION
We are proudly dedicating this project to our beloved parents for all their love and guidance,
which grow us in the shape that we make it up to this point. Moreover, we are dedicating our
work to our teacher “Sir Mian Saqib Mehmood” who filled us with courage, commitment and
awareness to follow the best possible route, by his unmatchable style and by best possible
teaching.

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Introduction:
NISHAT Mills Limited (“the Company”) is the most modern and largest vertically integrated
textile Company in Pakistan. The Company commenced its business as a partnership firm in
1951 and was incorporated as a private limited Company in 1959. Later it was listed on the
Karachi, Lahore and Islamabad Stock Exchanges on 27 November 1961, 11 March 1989 and
10 August 1992 respectively. The Company’s production facilities comprise of spinning,
weaving, printing, dyeing, home textile and garment stitching and power generation.
Overall, the Company has 32 manufacturing units each specializing in a specific product
range located in Faisalabad, Sheikhupura, Ferozewatwan and Lahore.
A major portion of the Company’s earnings is export based. Over the the years, the Company
has achieved significant geographical diversification in its export sales mix.
The Company has a very broad base of customers for its products outside Pakistan. It has a
long working relationship with the top brands of the world such as J.K.N. International,
Levis, Next, Pincroft Dyeing, Ocean Garments, Gap, Carreman, Tommy Hilfiger, Tommy
Bahamas, Crate & Barrel, Laura Ashley, American Living, Chaps, Hugo Boss, Revman and
John Lewis.
NISHAT Mills Limited is also called the flagship company of the NISHAT Group. NISHAT
Group (“the Group”) is a leading business entity in South Asia. Its net worth makes it the
largest business house of Pakistan. The Group has grown from a cotton export house into the
premier business group of the country. Highly diversified, the Group has a presence in all the
major sectors including Textiles, Cement, Banking, Insurance, Power Generation, Hotel
Business, Agriculture, Dairy, Real Estate, Aviation and Paper Products. Showcasing its
varied expertise and acumen in every facet of its operations, the group companies hold the
distinction of being among the leading players in each sector.
Nature of Business
Being a vertically integrated textile unit, NISHAT Mills Limited has adopted a business
model that helps it cater to the macro and micro level economic issues. The Company is
engaged in the business of textile manufacturing and of spinning, combing, weaving,
bleaching, dyeing, printing, stitching, apparel, buying, selling and otherwise dealing in yarn,
linen, cloth, other goods and fabrics made from raw cotton, synthetic fiber and cloth.

NISHAT Group Page 5
The Company is also committed to generate, accumulate, distribute, supply and sell
electricity. It is fully compliant with the requirements of all regulatory authorities of Pakistan.
The textiles sector occupies a pivotal position in Pakistan’s economy, accounting for 8
percent of GDP with a significant potential for growth. It has the most intensive backward
and forward linkages within the wider economic chain compared to any other sector, linking
agriculture from industry to exports.
The textile sector employs 40 percent of the industrial sector’s work force, which provides
livelihood to more than 10 million families. According to the International Cotton Advisory
Committee, Pakistan is the fourth largest producer of cotton and the third largest consumer of
cotton in the world. In addition, Pakistan is the world’s second largest cotton yarn exporter
and third largest cotton cloth manufacturer and exporter. Pakistan is unique as it has a self-
reliant production chain from cotton growing to ginning, spinning, weaving, processing and
finishing and from fabrics to home textiles and apparel; all have links in the textile and
clothing value chains which have been developed by Pakistan’s own industry.
Vision of Company:
To transform the Company into a modern and dynamic yarn, cloth and processed cloth and
finished product manufacturing Company that is fully equipped to play a meaningful role on
sustainable basis in the economy of Pakistan. To transform the Company into a modern and
dynamic power generating Company that is fully equipped to play a meaningful role on
sustainable basis in the economy of Pakistan.
Mission of Company:
To provide quality products to customers and explore new markets to promote/expand sales
of the Company through good governance and foster a sound and dynamic team, so as to
achieve optimum prices of products of the Company for sustainable and equitable growth and
prosperity of the Company.

NISHAT Group Page 6
Organizational History:
NISHAT Mills Limited (“the Company”) is the most modern and largest vertically integrated
textile Company in Pakistan. The Company commenced its business as a partnership firm in
1951 and was incorporated as a private limited Company in 1959. Later it was listed on the
Karachi, Lahore and Islamabad Stock Exchanges on 27 November 1961, 11 March 1989 and
10 August 1992 respectively. The Company’s production facilities comprise of spinning,
weaving, printing, dyeing, home textile and garment stitching and power generation.
Overall, the Company has 32 manufacturing units each specializing in a specific product
range located in Faisalabad, Sheikhupura, Ferozewatwan and Lahore.
Organizational Chart:
Our Board of Directors is the highest governing body and represents the interests of all our
shareholders. Our Board comprises eight members, including the Chairman, Vice Chairman
and our Chief Executive.
Bord of Directors
CEO
Spinning Division
Finance & MIS
Supply Chain
Managment
Production &
Marketing
HR Managment
Waveing Division
Internal Audit
Apperal Division
Power Division
Processing Home
Textile Division
Processing and
Stiching
Dying and
Finishing
Board Committee
Audit Committee
HR Committee

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Products:
Our fabric processing facility is one of the largest and most modern factories of Pakistan.
With an array of custom-made machinery, it has the capacity to produce 104 million meters
of fabric per annum. It is specially designed to handle heavy weight fabrics like twills, drills,
canvases / poplins, fabrics with minimum tension such as stretch fabrics and all high density
weaves. The advantage achieved by the customized design of its machines is the result of an
extensive research work with the help of world renowned machine makers. To ensure that our
customers get the very best we use more than 75% dyes and chemicals of European origin.
The standards are higher than ever, dedicated by fashion, efficient productivity and further
automation is engineered in the plant. To maintain quality and international standards, an on-
line Quality Control (QC) Department has been setup. The QC department is augmented by a
fully equipped Laboratory, which scrutinizes the fabric process flow at all levels. Our extra
ordinary Research & Development work and highly trained marketing personal are pivotal to
sustain long term business relationships.
We manufacture and market an extensive portfolio of specialty products such as textile
auxiliaries for applications in preparation, dyeing and finishing of fabrics.
Our selling range includes:
NISHAT Mills Limited has state of art garment manufacturing facility both for men and
women. The Apparel division has deployed 1767 high end sewing machines such as Vibe
Mac, Juki, Mitusibishi and Brother. The Division has the capacity to produce 7.20 million
garments per annum. The construction of a new garment unit with a capacity of 7.2 million
garments per annum is in progress.
NISHAT Linen is a concern of NISHAT Mills, the textile and home fashion retail chain that
has redefined the industry with acute attention paid to quality, design and affordability.
NISHAT Linen prides itself on being the brand of preference for discerning customers who
are in search of things, unique and chic without compromising on aesthetics or price.
Unsurpassed customer service, including tailor-made orders, ensures our clientele remains
loyal to the NISHAT family.
With an array of 939 modern new generation sewing machines, the Home Textile Division
consists of 2 stitching facilities. The two facilities combined have an average production
capacity of approximately 24 million meters per annum. The product line is customized to

NISHAT Group Page 8
manufacture products of various styles and sizes according to the requirements of our
customers, wholesalers, retailers and contract textile business.
Part 2: Introduction of Analysis of financial ratios:
Financial Ratios:
A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical
values taken from an enterprise's financial statements. Often used in accounting, there are
many standard ratios used to try to evaluate the overall financial condition of a corporation or
other organization. Financial ratios may be used by managers within a firm, by current and
potential shareholders (owners) of a firm, and by a firm's creditors. Financial analysts use
financial ratios to compare the strengths and weaknesses in various companies.[1]
If shares in
a company are traded in a financial market, the market price of the shares is used in certain
financial ratios.
Ratios can be expressed as a decimal value, such as 0.10, or given as an
equivalent percent value, such as 10%. Some ratios are usually quoted as percentages,
especially ratios that are usually or always less than 1, such as earnings yield, while others are
usually quoted as decimal numbers, especially ratios that are usually more than 1, such as P/E
ratio; these latter are also called multiples. Given any ratio, one can take its reciprocal; if the
ratio was above 1, the reciprocal will be below 1, and conversely. The reciprocal expresses
the same information, but may be more understandable: for instance, the earnings yield can
be compared with bond yields, while the P/E ratio cannot be: for example, a P/E ratio of 20
corresponds to an earnings yield of 5%.
Types of ratios:
Liquidity Ratios:
Liquidity ratios measure the adequacy of current and liquid assets and help evaluate the
ability of the business to pay its short-term debts. The ability of a business to pay its short-
term debts is frequently referred to as short-term solvency position or liquidity position of the
business. Generally a business with sufficient current and liquid assets to pay its current
liabilities as and when they become due is considered to have a strong liquidity position and a
business with insufficient current and liquid assets is considered to have weak liquidity
position.

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Short-term creditors like suppliers of goods and commercial banks use liquidity ratios to
know whether the business has adequate current and liquid assets to meet its current
obligations. Financial institutions hesitate to offer short-term loans to businesses with weak
short-term solvency position.
Four commonly used liquidity ratios are given below:
 Current ratio or working capital ratio.
 Quick ratio or acid test ratio.
 Absolute liquid ratio.
 Current cash debt coverage ratio.
Unfortunately, liquidity ratios are not true measure of liquidity because they tell about the
quantity but nothing about the quality of the current assets and, therefore, should be used
carefully. For a useful analysis of liquidity, these ratios are used in conjunction with activity
ratios (also known as current assets movement ratios). Examples of activity ratios are
receivables turnover ratio, accounts payable turnover ratio and inventory turnover ratio etc.
Profitability Ratios:
Profit is the primary objective of all businesses. All businesses need a consistent
improvement in profit to survive and prosper. A business that continually suffers losses
cannot survive for a long period. Profitability ratios measure the efficiency of management in
the employment of business resources to earn profits. These ratios indicate the success or
failure of a business enterprise for a particular period of time. Profitability ratios are used by
almost all the parties connected with the business. A strong profitability position ensures
common stockholders higher dividend income and appreciation in the value of the common
stock in future. Creditors, financial institutions and preferred stockholders expect a prompt
payment of interest and fixed dividend income if the business has good profitability position.
Management needs higher profits to pay dividends and reinvest a portion in the business to
increase the production capacity and strengthen the overall financial position of the company.
Some important profitability ratios are given below:
 Net profit (NP) ratio.
 Gross profit (GP) ratio.
 Price earnings ratio (P/E ratio).
 Operating ratio.
 Expense ratio.

NISHAT Group Page 10
 Dividend yield ratio.
 Dividend payout ratio.
 Return on capital employed ratio.
 Earnings per share (EPS) ratio.
 Return on shareholder’s investment/Return on equity.
 Return on common stockholders’ equity ratio.
Activity Ratios:
Activity ratios (also known as turnover ratios) measure the efficiency of a firm or company in
generating revenues by converting its production into cash or sales. Generally a fast
conversion increases revenues and profits.
Activity ratios show how frequently the assets are converted into cash or sales and, therefore,
are frequently used in conjunction with liquidity ratios for a deep analysis of liquidity.
Some important activity ratios are:
 Inventory turnover ratio.
 Receivables turnover ratio.
 Average collection period.
 Accounts payable turnover ratio.
 Average payment period.
 Asset turnover ratio.
 Working capital turnover ratio.
 Fixed assets turnover ratio.
Solvency Ratios:
Solvency ratios (also known as long-term solvency ratios) measure the ability of a business to
survive for a long period of time. These ratios are very important for stockholders and
creditors. Solvency ratios are normally used to:
 Analyze the capital structure of the company.
 Evaluate the ability of the company to pay interest on long term borrowings.
 Evaluate the ability of the company to repay principal amount of the long term loans
(debentures, bonds, medium and long term loans etc.).
 Evaluate whether the internal equities (stockholders’ funds) and external equities
(creditors’ funds) are in right proportion.
Some frequently used long-term solvency ratios are given below:
 Debt to equity ratio.
 Times interest earned (TIE) ratio.
 Proprietary ratio.

 Fixed assets to equity ratio.
 Current assets to equity ratio.
 Capital gearing ratio.
Classification on the basis of financial statements:
Income statement/profit and loss ratios:
Income statement/profit and loss account ratios are those ratios that are calculated by using
the items of income statement/profit and loss account of a particular period only. Examples of
income statement/profit and loss account ratios are net profit ratio, gross profit ratio,
operating ratio, and times interest earned ratio etc.
Balance sheet ratios:
Balance sheet ratios are those ratios that are calculated by using figures from the balance
sheet only. The figures must be used from the balance sheet of the same period. Examples of
balance sheet ratios are current ratio, liquid ratio, and debt to equity ratio etc.
Composite ratios:
These ratios are calculated by using the items of both income statement and balance sheet for
the same period. Composite ratios are, therefore, also known as mixed ratios and inter-
statement ratios. Numerous composite ratios are computed depending on the need of analyst.
Some examples are inventory turnover ratio, receivables turnover ratio, accounts payable
turnover ratio, and working capital turnover ratio etc.
Horizontal and vertical Analysis:
 Horizontal Analysis:
Horizontal analysis is the process of comparing financial results over time. The income
statements or balance sheets for subsequent years are presented together so a financial
statement analyst can examine how the figures trend over time. Horizontal analysis
techniques can be useful to spot business trends, but this method has drawbacks as well. One-
time accounting charges -- such as expenses for impairment or losses from natural disasters
and changes in company structure, such as discontinued operations or acquisition activity can
make analysis difficult.

 Vertical Analysis:
Vertical, or common-size, analysis is the process of preparing financial statements that are
adjusted as percentage of sales or other account category totals. This technique allows
financial statement analysts to see the compositions of the different categories of financial
statements. On the income statement, a sale is commonly used as the reference category and
is the denominator of all of the other calculations; the balance sheet uses total assets, total
liabilities and total equity. The downside of vertical analysis is that it only offers a look at one
year of operations. This can make it difficult to come to conclusions about the business over
time.

Horizontal and Vertical Analysis of Niashat Group (2015)
Vertical Analysis:
Profit & Loss Account 2015 (%)
Sales 100
Cost of sales 88.23
Gross profit 11.77
Distribution expanses 4.74
Administration expenses 2.15
Other expenses 0.72
Other income 7.83
Profit from Operations 11.99
Finance Cost 3.41
Profit before taxation 8.58
Taxation 0.93
Profit after taxation 7.64
Balance sheet 2015 (%)
Total Equity 75.28
Noncurrent liability 5.76
Current liability 18.95
Total equity and liability 100
Noncurrent assets 76.08
Current Assets 23.92
Total Assets 100

Horizontal Analysis:
Profit & Loss 2015 (%)
Sales 162
Cost of sales 177
Gross profit 101
Distribution Cost 142
Administration expenses 202
Other expenses 127
Other income 408
Profit from Operations 139
Finance Cost 155
Profit before taxation 134
Taxation 129
Profit after taxation 134
Balance sheet 2015 (%)
Total Equity 243
Noncurrent liability 138
Current liability 181
Total equity and liability 219
Noncurrent assets 223
Current Assets 206
Total Assets 219

Analysis of Financial Statements (2014):
 Liquidity Ratios:
Current/ working capital Ratio= Current Assets/Current Liabilities
1.34:1
 The current ratio is he below the standard 2:1 which shows that the company has not
more paying debt ability.
Quick/liquid Ratio= Quick Assets /Current liabilities
0.68:1
 The quick ratio is below the standard 1:1, which depicts the solvency situation of the
company is not favorable.
Absolute/Cash Ratio= Absolute liquid Assets/current liabilities
0.13:1
 The cash position of the company is not better. Its ratio is not above the standard
0.50:1 which is unfavorable for the company.
Activity Ratios:
Inventory turnover Ratio= Cost of sale/ Average inventory
3.93
 Inventory Turnover Ratio measures the number of times, on average; the inventory is
sold and replaced during the fiscal year. This ratios show that company’s inventory is
sold and replaced 3.93 times at the end of 2014.
Debtors turnover= Net sales/ Gross Average receivables
11.87
 Receivables turnover ratio measures company's efficiency in collecting its sales on
credit and collection policies. This ratio shows that company’s debtor’s turnover is
11.87 time at the end of 2014.
Average Debtors turnover in days= Average G. receivable/Net sales/365
30.75
 Debtor’s turnover in days simply measures in how many days the receivables are
collected during a particular period. This ratio shows that in 30.75 days company’s
receivables are collected.

Inventory turnover in days= 365*Average inventory/Cost of sale
90.88
 Inventory Turnover in days measures the number of days, on average; the inventory is
sold and replaced during the fiscal year. This ratio depicts that company’s inventory is
sold and replaced in 90.88 days at the end of 2014.
Operating cycle= Debtor’s turnover in days + Inventory’s turnover in days.
73.29
 This ratio depicts that company has 73.29 days in operating cycle that shows company
takes 73.29 days to convert its resource inputs into cash.
Debt to Equity Ratio= Total Debts/ Equity
9.38
 Debt to equity ratio is a long term solvency ratio that indicates the soundness of long-
term financial policies of the company. This ratio shows the relation between the
portion of assets provided by the stockholders and the portion of assets provided by
creditors. And it depicts that debts are higher than equity.
Total Asset turnover = Sales/ Total Assets
0.56
 Asset turnover ratio is the ratio of a company's sales to its assets and NISHATs’s total
assets turnover ratio is 0.56 at the end of 2014.
Fixed asset to equity ratio= Fix Assets/ Equity
2.37
 Fixed Assets to equity ratio of Company is 2.37 that shows fixed assets are 2.37 with
respect to equity.
Debt Ratio= Total debts/ Total Assets
0.29
 Debt ratio is indicating the proportion of a company's debt to its total assets at the end
of 2014.
Gross profit ratio= Gross profit/ sales*100
14.44
 The gross profit ratio shows the profit after deducting the cost of production, the cost
of production is relatively very high of NISHAT Co. than its operating cost.

Operating Ratio= Operating profit/sales*100
13.93
 Operating Profit shows the result of profit after the gross profit. The operating cost of
the company is limited and not becoming cause of reducing more profits. Operating
results are good according to this ratio.
Net profit Ratio= Net profit/sales*100
10.13
 The net profit ratio I derived which depicts the income results after tax and interest
which are approximately 2% of the total income. However it’s is not a heavy burden
on the company.
Return on Equity Ratio =Net Profit /Share Holder’s Equity *100
156.78
 Return on equity ratio measures the return to both common and preferred
shareholders. The higher the return, the better it is.
Return on Assets Ratio =Net Profit /Total Assets *100
5.68
 The purpose of this ratio is to calculate the return that the business is providing on
total assets. If utilization of assets is productive the return would be high and position
would be good. The higher return on assets, the better it is.
DuPont Analysis:
Return on Assets = Net income/ Total Assets
5.68
 The Company is efficiently utilizing its assets to generate the income, but however
this ratio is not enough good, the company can increase its assets efficiency by
increasing the net income.
 The company is generating good sales by the consumption of its Net fix assets.
Return on Equity= Net income/ Shareholders equity
8.65

 This rate is showing the company’s income on the basis of capital invested by the
shareholders. Results are showing favorable situation.
Market Ratio Analysis:
Earnings per share ratio= Net income-preferred dividend/ No of share holders
15.68
 The Profits distribute to every shareholder are of good rate, its mean that the company
performance for his shareholders is relatively better.
Price to earnings ratio= Market price per share/ Earning per share
7.14
 The market price of the company’s share is less than its face value Rs=10, the
shareholders expectations are low from the company profits.
Dividend payout ratio= Dividend/ Net income
25.51
 The part of the income distributed among the shareholders is better. Its means the
company is not creating more reserves and make investments into other projects.
However company set aside a portion of net income.
Analysis of Financial Statements (2015)
Liquidity Ratios:
Current/ working capital Ratio= Current Assets/Current Liabilities
1.26:1
 The current cash position of the company is favorable, company do not held cash
above and below the standards
Quick/liquid Ratio= Quick Assets /Current liabilities
0.65:1

 The company’s liquidity position is not better cause it has not enough liquid assets to
meet its current liability and below the standard of 1:1
Absolute/Cash Ratio= Absolute liquid Assets/current liabilities
0:1
 The cash position in most liquid term of the company is not better, and it’s too much
below the standard of 0.50:1.
Activity Ratios:
Inventory turnover Ratio= Cost of sale/ Average inventory
3.91
 Inventory turnover ratio for 2014 is 3.93 and in 2015 it is 3.91 and it is showing
favorable condition for the company.
Debtors turnover= Net sales/ Gross Average receivables
17.22
 Debtor’s turnover ratio for 2014 is 11.87 and in 2012 it is 17.22 and it is showing
unfavorable condition for the company.
Average Debtors turnover in days= Average G. receivable/Net sales/365
21.20
 Average debtor’s turnover in days is 35.75 in 2014 and in 2015 days are 21.20 that is
showing favorable condition for the company.
Inventory turnover in days= 365*Average inventory/Cost of sale
93.37
 Inventory turnover ratio in days is 92.88 and in 2014 it is 93.37 in 2015 that is
showing unfavorable trend for the company.
Operating cycle= inventory turnover in days+ debtors turnover in days
52.05
 In 2014 company had 73.29 days in its operating cycle and in 201 it has 52.05 days
that is showing favorable position of Company.

Debt to Equity Ratio= Total Debts/ Equity
7.33
 In 2014 company had 9.38 debts to equity ratio while in 2015 company has 7.33.
Lower the ratio will be better for the company .This ratio is showing favorable
situation for company
Total Asset turnover = Sales/ Total Assets
0.51
 Total assets turnover ratio is 0.56 in 2014 and in 2015 ratio is 0.51. This ratio shows
that total asset turnover of company was better in 2014.
Fixed asset to equity ratio= Fix Assets/ Equity
2.10
 Fixed assets to equity ratio is 2.37 in 2014 and in 2015 ratio is 2.10 that is not better
as compare to 2014.
Debt Ratio= Total debts/ Total Assets
0.19
 In 2014 company had debt ratio of 0.29 and in 0.19 in 2015. This is showing that
company has less assets than debts
Gross profit ratio= Gross profit/ sales*100
11.77
 This results is not better than previous years, this ratio is decreased by 3 percent. Its
means that company is not effectively controlling its cost.
Operating Ratio= Operating profit/sales*100
11.98
 Operating ratio result is also below than the last year result, but due to cost of
production not due to operating expenses because the percentage of operating
expenses still of last year.

Net profit Ratio= Net profit/sales*100
7.64
 Net profits of this year affected by the cost of production not by the tax and interest it.
Return on Equity Ratio =Net Profit /Share Holder’s Equity *100
5.46
 Return on equity ratio measures the return to both common and preferred
shareholders. Current year ratio of ROE is Unfavourable last year ROE is 156.78
while in 2015 the ratio decreases by 45% this year.
Return on Assets Ratio =Net Profit /Total Assets *100
3.90
 The purpose of this ratio is to calculate the return that the business is providing on
total assets. This condition is unfavourable because in 2014 ROA is 5.68 which is
higher than this year.
DuPont Analysis:
The return on asset ratio developed by DuPont for its own use and right now it is used by
many of the organizations to evaluate how effectively assets are used.
Total asset to share holder equity 1.40
Return on Equity 5.46
Net profit Margin 7.64
Assets Turnover 0.51
Return on assets 3.90
 Sales of the Company has decreased by 6% in the Current year as compared to
corresponding last year. This has resulted in decrease in net profit margin from
10.13% to 7.64% which is the primary reason in the decrease of return on equity.
Asset turnover decreased from 0.56 times to 0.51 times due to decrease in sales.

Market Ratio Analysis:
Earnings per share ratio= Net income-preferred dividend/ No of share holders
11.13
 Earnings per share ratio is decreased by 4 percent its means that company’s
profitability is decreased.
Price to earnings ratio= Market price per share/ Earning per share
10.26
 This is favorable results of the company that its price to earnings ratio increases from
7.14 to 10.26.
Dividend payout ratio= Dividend/ Net income
40.43
 Dividend ratio is increased by 15 percent.
Conclusion:
After analyze the financial position of the NISHAT Company of 2014 and 2015, after the
whole analysis we conclude that The footing of balance sheet of the Company has grew to
219% in financial year 2014-15 as compared to balance sheet of financial year 2009-10. The
growth in the equity is marvelous which reflects that the Company is low geared business and
depicts its financial capability to expand its operations. Sales declined by 5.90% in the first
quarter of the year as compared to the sales of corresponding quarter of the last year. Gross
profit of the Company decreased by Rs. 1,840 million (23.39%) in the current year as
compared to gross profit of the last year. After tax profit percentage has decreased by 2.49%
to 7.64% in the current year from the last year. The company has downward trend in its
financial position, As the investor we suggest that the investor should not made heavy and
long term investments in That company.

Cross Section Analysis
Ratios NISHAT GulAhmed Favourable Company
2015 2015
Liquidity Ratios
Current Ratio 1.26 1.05 NISHAT
Quick Ratio 0.65 0.24 NISHAT
Cash Ratio 0.0 0.01 GulAhmed
Activity Ratio
Inventory Turnover Ratio 3.91 2.35 GulAhmed
Inventory Turnover in days 93.37 155 NISHAT
Debtors turn over 17.22 20.33 NISHAT
Debtors turn over in days 21.20 18 GulAhmed
Operating cycle 52.05 55 NISHAT
Profitability Ratios
Gross profit Ratio 11.77 18.27 GulAhmed
Net profit Ratio 7.64 1.81 NISHAT
Total Assets turnover 0.51 1.33 GulAhmed
Operating Ratio 11.98 19.65 GulAhmed
ROE 5.46 8.75 GulAhmed
ROA 3.90 2.42 NISHAT
DuPont Analysis
Total assets to Shareholder
equity
1.40 3.61 GulAhmed
Return on Equity 5.46 8.75 GulAhmed
Net Profit Margin 7.64 1.81 NISHAT
Assets Turnover 0.51 1.34 GulAhmed
Return on Assets 3.90 2.42 NISHAT
Debt Ratio Analysis
Debt to equity Ratio 7.33 0.34 GulAhmed
Debt Ratio 0.19 0.60 NISHAT
Fixed asset to equity 2.10 1.28 GulAhmed
Market ratios
Earnings per share 11.13 2.65 NISHAT
Price to Earnings Ratio 10.26 18.51 GulAhmed
Dividend Payout 40.43 56.60 GulAhmed
Conclusion:
We have analysed the financial ratio of NISHAT textile Industry GULAHMED textile
Industry and we conclude that GULAHMED is better financial condition and it would be
better to invest in GULAHMED Company than NISHAT Company. Though GULAHMED
have increasing trend in its financial ratio and NISHAT have downward trend but still
GULAHMED is in better position than NISHAT.

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