[REPORT ON

FINANCIAL RATIOS]

Acknowledgement
In the name of Allah, the most beneficent and merciful
who gave us strength and knowledge to complete this report.
This report is a part of our course Financial Management.
This has proved to be a great experience. This report is a
combine effort of Urooj Khursheed (7151-FMS/MBA/F15),
Kishwar Noreen (7154-FMS/MBA/F15), Jaweria Zubair (7158FMS/MBA/f15), Abida Hussain (7150-FMS/MBA/F15) And Hira
Mustafa (7143-FMS/MBA/F15).We would like to express our
gratitude to Ms. Tahira Awan Who gave us this opportunity to
fulfill this report on the ratio analysis of financial statements
of Maple Leaf Cement Company. By doing this project we
come across with a lot of information that enhances our
knowledge and will be beneficial for us in future studies.

Table of Contents

Introduction
Mission Statement
Vision Statement
Board Of Directors
Balance Sheets of four years
Profit & Loss Account of three years
Ratio Analysis & Interpretation

Kohinoor Maple Leaf Company

KMLG is one of Pakistans biggest groups with operations in Textile, Cement and Financial
sectors. The Group started off with textile mill in 1953. Today, KMLGs structure comprises of
two public limited companies listed on Pakistan Stock Exchange i.e. Kohinoor Textile Mills
Limited (KTML) and Maple Leaf Cement Factory Limited (MLCFL) and one unlisted public
limited company i.e. Maple Leaf Capital Limited (MLCL).
MLCFL & MLCL are subsidiary companies of KTML. The initial capacity of KTMLs
Rawalpindi unit comprised of 25,000 spindles and 600 looms; later, fabric processing facilities
were added and spinning capacity was augmented to 156,528 ring spindles. Additional KTMLs
production facilities were acquired on Raiwind, Manga Road near Lahore in District Kasur and
on Gulyana Road near Gujar Khan, by way of merger.

Maple Leaf Cement Company

Maple Leaf Cement Factory Limited is a grey cement producer in Pakistan. The Company's
principal activity is the production and sale of cement. The Company is engaged in supplying
cement for building infrastructure in the country. The Company produces various products,
including Ordinary Portland Cement, Sulphate Resistant Cement, Low Alkali Cement and White
Cement. The Company operates in two geographical areas, which include Asia and Africa. Its
products are used for the construction of airports, runways and air bases, dams, barrages,
waterways, residential complexes, high-rise buildings, highways and motorways. The Company
exports its products to Afghanistan, Gulf States, South Asia, Africa, the Indian Ocean Island
Republics and Central Asia. The Company has a production capacity of 10,700 tons per day for
grey cement and 500 tons per day for white cement. The Company's cement factory is located at
Iskanderabad District Mianwali in the province of Punjab.
Maple leaf cement is evolving over the years and playing a pivotal role in cement industry just
like a vein of a leaf as a driver of plant evolution. Visionary management upgrading systems with
the speed of time to meet the need of market. Unmatched and talented team at Maple leaf putting
their efforts to create the difference and turning over a new leaf.

Mission Statement

The Company shall achieve its vision through a continuous process of having sourced and
implemented the best leading edge technology, industry best practice, human resource and by
conducting its business professionally and efficiently with the responsibility to all its
stakeholders and community.

Vision Statement

The Maple Leaf Cement Factory stated vision is to achieve and then remain as the most
progressive and profitable Company in Pakistan in terms of industry standards and stakeholders
interest.

Balance Sheet

Profit & Loss Account of Maple Leaf Cement Company

Ratio Analysis of Financial Statements and Interpretation

Liquidity Ratios

1. Net Working Capital:

It measures the companys ability to pay off its current liabilities with its current assets.
Net Working Capital = Current Assets Current Liabilities

Net Working Capital

500000
0
2013

2014; 12873
2014

2015

-500000
2015; -705256
-1000000
-1500000
-2000000

2013; -1885645

Interpretation & Analysis:

A positive Net-Working capital indicates that the company is able to generate enough in order to
pay its current liabilities with its current assets to creditors and investors. While negative NetWorking capital shows creditors and investors that business operations are not producing enough
in order to pay its current liabilities with its current assets. It can be seen in the trend analysis
graph of net working capital of Maple leaf company that its net working capital was negative in
2013 & 2015 while positive in 2014 which indicates that companys current liabilities were
greater than its current assets in 2013 & 2015, it is not a good indication for Maple Company.
2. Current Ratio:
It measures the amount of liquidity available to pay for current liabilities. It measures
how much a company is efficient and able to pay its short term liabilities with its current
assets.
Current ratio = Current assets / Current liabilities

Current Ratio
1.2
1
0.8

Current Ratio

0.6
0.4
0.2
0
2013

2014

2015

Interpretation:
It measures whether a company has enough resources or not to pay its short term debt by
comparing firm's current assets to its current liabilities. Maple Leaf Cement Co. has current ratio

0.77 that increased in 2014 to 1 and then decreased to 0.9 in 2015. This indicates that company is
not much able to pay its current obligations through its current liabilities. This shows that to pay
Rs. 1 of current liabilities company has only 0.7 Rs. In 2013 and so on.
3. Quick Ratio:
It is as same as the current ratio, but does not include inventory and measures that is
company have enough quick assets to pay its current obligations.
Quick Ratio = (Current assets Inventories Prepayments) / Current liabilities

Quick Ratio
3.5
3
2.5
2
1.5
1
0.5
0

Interpretation & Analysis:

Quick Ratio

This ratio measures the liquidity of the company by showing its ability to pay its short term debts
with its quick assets. In above calculations of Maple leaf company for quick ratio indicates that
for 2013, to pay Rs. 1 of current liabilities company has Rs. 0.2 in its quick assets. This indicates
that company is not in good position. Moreover you can see in the graph that quick ratio of the
company rised in 2014 but again fall in 2015.
4. Super Quick Ratio:
It measures that either firm has enough cash and equivalents and marketable securities in
order to pay its short-term obligations.
Super Quick ratio = (Cash + Mkt securities) / Current Liabilities

Super Quick Ratio

0.07
0.06
0.05
Super Quick Ratio

0.04
0.03
0.02
0.01
0
2013

2014

2015

Interpretation:
Higher the super quick ratio indicates the better condition of firm. Maple Leaf co.s super quick
ratio indicates that it is not in better condition as its super quick ratio decreased over years.

Turnover Ratios

Inventory Turnover Ratio:

Inventory turnover ratio shows that how effectively a company is managing its inventory by
comparing the cost of goods sold with average total inventory. This measures how many times
average inventory is converting into cost of goods sold during a period.
Inventory Turn-Over Ratio = CGS/ Total Average Inventory
Interpretation:
Inventory turnover measures how efficiently a company is controlling its inventory, so its must
be high. Maple leaf cement companys inventory turnover in 2013 was almost 12 times, which
means that inventory was converted into cost of goods sold 12 times in a period, while it
gradually decreases in 2014 and 2015, which indicates that companys inventory was not
converted into cost of goods quickly.

Inventory Turnover Ratio

12.5
12
Inventory Turnover
Ratio

11.5
11
10.5
10
2013

2014

2015

Total Asset Turnover ratio:

Total asset turnover ratio measures a companys ability to generate sales with its assets by
comparing its sales with its total assets. It tells how efficiently a company can use its assets in
order to generate sales.
Total Asset Turnover Ratio = CGS / Average Total Assets

Total Asset Turnover Ratio

0.7
0.6
0.5

Total Asset Turnover

Ratio

0.4
0.3
0.2
0.1
0
2013

2014

2015

Interpretation & analysis:

This ratio measures how efficiently a firm is using its assets in order to generate sales, so a
higher asset turnover ratio is considered more favorable for the company. In the case of Maple
Leaf cement company, this ratio is 0.5 times that slightly increased over time period. This
indicates that company start managing its assets over the time period and is better utilizing its
total assets in order to generate sales.
Fixed Asset Turnover Ratio:
Fixed asset turnover ratio measures that how efficiently a company return on its fixed assets or
return on their investments in property, plant and equipments by comparing the net sales with
companys total fixed assets. It measures that how effectively a company has managed its fixed
assets and generating sales from them.
Fixed Asset Turnover Ratio = CGS / Average Fixed Assets

Fixed Asset Turnover Ratio

1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2013

Fixed Asset Turnover

Ratio

2014

2015

Interpretation & Analysis:

A high fixed asset turnover ratio indicates the better utilization of fixed assets. In the case of
Maple Leaf cement company, their turnover ratio was almost 0.7 in 2014 that increased over
time period to 0.9 in 2015, which indicates that company is better managing its fixed assets and
utilizing its fixed assets in the way to generates sales from it.
Current Asset Turnover Ratio:
This ratio indicates the relationship between sales and current assets of a company. It measures
the companys ability to generate sales from its current assets.

Current Asset Turnover Ratio = CGS / Average current Assets

Current Asset Turnover Ratio

2.8
2.75
2.7

Current Asset Turnover

Ratio

2.65
2.6
2.55
2.5
2013

2014

2015

Interpretation & Analysis:

A high turnover ratio indicates the better utilization of current assets by the firm. In the case of
Maple Leaf cement company, its current asset turnover ratio was almost 2.6 in 2014 that slightly
increased over time period. This indicates that company maintained its utilization of current
assets over time period in order to generate sales.
Net Working Capital Turnover:
This ratio indicates the companys effectiveness in using its net working capital by comparing
companys net sales with its net working capital.
Net Working Capital Turnover Ratio = CGS / Average Net Working Capital

Net-Working Capital Turnover

1600
1400
1200
Net-Working Capital
Turnover

1000
800
600
400
200
0
2013
-200

2014

2015

Interpretation & Analysis:

This ratio indicates the better management of net working capital, and net working capital can be
high if company managed its current assets and current liabilities. High and positive net working
capital turnover ratio indicates the better utilization of net working capital in the way to generate
sales. Maple Leaf cement companys turnover ratio was negative in 2013 that indicates that
companys current liabilities were greater than its current liabilities. While it get positive in 2014
but again in 2015 it went negative. This indicates that company managed its current assets and
current liabilities in 2014, but inefficiently worked in other years. This might also show that
company may had taken much short term debt with respect to its ability to pay with its current
assets.

Capital Structure Ratio

Debt-Equity Ratio:
The debt to equity ratio is a financial, liquidity ratio that compares a company's total debt to total
equity. The debt to equity ratio shows the percentage of company financing that comes from
creditors and investors.
Debt-Equity Ratio = Total Debt / Total Shareholders Equity

Debt-Equity Ratio
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2013

Debt-Equity Ratio

2014

2015

Interpretation & Analysis:

A lower debt-equity ratio indicates the stability of the company. While a company with high
debt-equity ratio is considered to be risky for investors and creditors too. As it can be seen in
graph that Maple leaf companys debt-equity ratio decreased over the years, which indicates that
now company is less getting less finance through investors.
Long term Debt-Equity Ratio:
The debt to equity ratio is a financial, liquidity ratio that compares a company's long-term debt to
total equity. The long-term debt to equity ratio shows the percentage of companys long-term
financing that comes from creditors and investors.
Long term Debt-Equity Ratio = Total Long term Debt / Total Shareholders Equity

LongTerm Debt-Equity Ratio

1.2
1
0.8

LongTerm Debt-Equity
Ratio

0.6
0.4
0.2
0
2013

Interpretation & Analysis:

2014

2015

A lower long term debt-equity ratio indicates the better stability of the company. While a
company with high debt-equity ratio is considered to be risky for investors and creditors too. As
it can be seen in graph that Maple leaf companys long term debt-equity ratio decreased over the
years, which indicates that now company is less getting less long term finance through investors.

Debt-Capital Ratio:
The debt-capital ratio is calculated by taking the company's debt, including both short and longterm liabilities and dividing it by the total capital. Total capital is all long-term debt plus
shareholders' equity, which may include items such as common stock, preferred stock and
minority interest.
Debt-Capital Ratio = Total Debt / Total capital

Debt-Capital Ratio
0.7
0.6
0.5
Debt-Capital Ratio

0.4
0.3
0.2
0.1
0
2013

2014

2015

Interpretation:
It measures how much of the capital employed is debt. Higher debt included in the capital
employed means higher risk of insolvency. As it can be seen in graph that Maple leaf companys
long term debt-capital ratio decreased over the years, which indicates that now company is less
which indicates that less capital of company is on debt, that is good for the company.

Debt-Total Asset Ratio:

This ratio measures the amount of total assets that are financed by creditors instead of investors.
In other words, it shows what percentage of assets is funded by borrowing compared with the
percentage of resources that are funded by the investors.
Debt-Asset Ratio = Total Debt / Total Assets

Debt-TotalAsset Ratio
0.7
0.6
0.5
Debt-TotalAsset Ratio

0.4
0.3
0.2
0.1
0
2013

2014

2015

Interpretation & Analysis:

Companies that have high of this ratio are considered to be very risky by the investors and
creditors. As you can see in above graph, Maple leaf had constantly decreasing Debt-asset ratio
which indicates that company will have to pay out a smaller percentage of its profits in principle
and interest payments.
Proprietary Ratio:
This ratio measures the amount of assets that are financed by owners' investments by comparing
the total equity in the company to the total assets.
Proprietary Ratio = Total equity / Total Assets

Proprietry Ratio
0.24
0.23
0.23
Proprietry Ratio

0.23
0.23
0.23
0.22
0.22
2013

2014

2015

Interpretation & Analysis:

A higher ratio also shows potential creditors that the company is more sustainable and less risky
to lend future loans. In the case of Maple leaf, it is increasing year by year as you can see in the
graph. This indicates that companys assets are financed through the investments.
Interest Coverage Ratio:
The interest coverage ratio is a financial ratio that measures a companys ability to make interest
payments on its debt on time.
Interest Coverage Ratio = Earning Before Interest & Tax / Interest Expense

Interest Coverage Ratio

6
5
4

Interest Coverage
Ratio

3
2
1
0
2013

2014

2015

Interpretation & Analysis:

If the coverage equation equals 1, it means the company makes just enough money to pay its
interest. In the case of Maple leaf it is above 1 that indicates that company is enough money to
pay its interests.

Profitability Ratios

Gross Profit Margin:

It calculates the percentage of sales that exceeds the cost of goods sold. It measures how
efficiently and effectively company is using its resources in order to generate profits.
Gross Profit Margin = ( GP / Net Sales) * 100

Gross Profit Margin

36.5
36
35.5
Gross Profit Margin

35
34.5
34
33.5
33
2013

2014

2015

Interpretation & Analysis:

This ratio indicates the managers and investors that how effectively and efficiently a company is
producing and selling the products and generating profits. In the case of Maple leaf company, its
gross profit was almost 35 % that went down in 2014 and then rise in 2015. Its better
interpretation can be done by comparing its gross profit with other firms in the industry.
Operating Profit Margin:
This ratio measures what percentage of revenue is generated by operating income. It shows that
how much revenue is left over after paying all operating costs.
Operating Profit Margin = ( EBIT/ Net Sales ) * 100

Operating Profit Margin

23
22
21

Operating Profit
Margin

20
19
18
17
16
2013

2014

2015

Interpretation:
This ratio shows the managers and investors that how various businesses are supporting their
operations. A higher ratio shows that company is making enough money in order to pay its
operating costs. In the case of Maple Leaf net profit margin went on increasing over the year, but
still in order to demonstrate that company has better operating margin ratio it should be
compared with other firms in same industry.
Net Profit Margin:

Net profit margin ratio is a percentage of net profit to the revenue earned or sales during a period.
This ratio indicates that how much of the net income a company can generate from its net sales.
Net Profit Margin = ( EAT / Net Sales ) * 100

Net Profit Margin

20
18
16
14
12
10
8
6
4
2
0
2013

Net Profit Margin

2014

2015

Interpretation:
It measures how much of each dollar earned by the company is converted into profit. A higher
ratio indicates the high safety margin and the low ratio indicates the low safety margin. Maple
Leaf cement company had net profit margin equal to 18% in 2013, this indicates that 18% of net
sales is generating net income or net profit that gradually decreased over years in the case of
Maple Leaf Company.

CGS Ratio:
This ratio indicates the relationship between cost of goods sold and sales by comparing both of
them. It measures the efficiency of company, to show that how much cost it incurred in order to
generate sales.
CGS Ratio = ( CGS / Net Sales ) * 100

CGS Ratio
66
65.5
65

CGS Ratio

64.5
64
63.5
63
62.5
2013

2014

2015

Interpretation & Analysis:

This ratio measures the cost that is incurred in order to generate sales. A low ratio indicates more
proficiency of the company, while high ratio is not good indicator for the firm as it shows that
company is incurring much of cost. As it can be seen in the graph that Maple leaf reduced its cost
of goods sold over the time period which results in higher profits.
Operating Expense Ratio:
This ratio indicates the relationship between the operating expenses and net sales by comparing
both of them. This measures how much of net sales is used in order to pay expenses that are
incurred due to operating activities.
Operating Expense Ratio = ( ( Admin Expense + Selling Expense ) / Net Sales) * 100

Operating Expense Ratio

10
9
8
7
6
5
4
3
2
1
0
2013

Operating Expense
Ratio

2014

2015

Interpretation & Analysis :

High ratio indicates that much of company generated sales went in paying operating expenses.
As you can see in the graph it is clearly be analyzed that companys operating expenses
increasing over the years, which is not good indication for the profitability of the firm.

Administrating Expense Ratio:

This ratio indicates the relationship between the administrative expenses and net sales by
comparing both of them. This measures how much of net sales is used in order to pay expenses
that are incurred due to administrative activities.
Administrating Expense Ratio = ( Admin Expense / Net Sales ) *100

Admin Expense Ratio

2
1.5

Admin Expense
Ratio

1
0.5
0
2013

2014

2015

Interpretation & Analysis:

Lower ratio predicts the profitability of a firm while high ratio indicates that the firm is using
much of its generated sales in expenses that are generated due to administrative activities. In case
of Maple Leaf Company, this ratio was low in 2013 but increased over the time period which
indicates the low profitability of the firm and shows that either companys expenses are going
high or it had slightly low sales in 2014 and 2015 as compared to sales in 2013. As you can see
in the Profit & Loss Account of company which indicates that companys sales were increasing
year by year but its expenses were also increased over time period, hence it should control its
assets.
Selling Expense Ratio:
This ratio indicates the relationship between the selling expenses and net sales by comparing
both of them. This measures how much of net sales is used in order to pay expenses that are
incurred due to selling activities.
Selling Expense Ratio = ( Selling Expense / Net Sales ) * 100

Selling Expense Ratio

7
6
5
4
3
2
1
0
2013

Selling Expense
Ratio

2014

2015

Interpretation & Analysis:

Lower ratio predicts the profitability of a firm while high ratio indicates that the firm is using
much of its generated sales in expenses that are generated due to selling activities. In case of
Maple Leaf Company, this ratio was low in 2013 but increased over the time period which
indicates the low profitability of the firm and shows that either companys expenses are going
high or it had slightly low sales in 2014 and 2015 as compared to sales in 2013. As you can see
in the Profit & Loss Account of company which indicates that companys sales were increasing
year by year but its expenses were also increased over time period, hence it should control its
selling expenses.
Financial Expense Ratio:
It shows the relationship between financial expenses and total sales by comparing both of them.
It indicates what percentage of generated sales is used in paying the financial expenses occurred
by the companys management.
Financial expense Ratio = ( Financial Expense / Net Sales ) * 100

Financial Expense Ratio

12
10

Financial Expense
Ratio

8
6
4
2
0
2013

2014

2015

Interpretation & Analysis:

Lower ratio indicates the more profitability of the firm and high ratio shows that much portion of
its generated sales is being utilized in paying expenses. In the case of Maple Leaf Company, their
financial expense ratio indicates that over time period their financial expenses got decreased
which indicates that companys management is managing its financial expenses well.
Operating Ratio :
The operating ratio compares production and administrative expenses to net sales. The ratio
reveals the cost per sales dollar of operating a business.
Operating Ratio = (( CGS + Operating Expense ) / Net Sales ) * 100

Operating Ratio
74
73.5
73

Operating Ratio

72.5
72
71.5
71
2013

2014

2015

Interpretation & Analysis:

A lower operating ratio is a good indicator of operational efficiency, especially when the ratio is
low in comparison to the same ratio for competitors and benchmark firms. In above graph, it can
be analyzed that companys operating ratio was good in 2013, but in 2014 it goes high due to
high sales and operating expenses, but in 2015 it managed its expenses and make it low.
Basic Earning Power Ratio:
This ratio measures the ability of firms total assets to generate operating income or earning
before tax and interest. It is calculated by comparing the earning before income tax and interest
with total assets.

Basic Earning Power Ratio = ( EBIT / Total Assets ) * 100

Bsic Earning Power Ratio

70
60
50
40
30
20
10
0
2013

Bsic Earning Power

Ratio

2014

2015

Interpretation & Analysis :

It calculates the earning power of business before the income tax and interest effect the profit. It
measures the basic profitability of assets. A high basic earning power ratio indicates the better
profitability of the firm. In the case of Maple Leaf Company, it shows that companys basic
earning power increased over the time period. This indicates that company is better utilizing its
assets in order to generate operating profit.
Return On Assets:
It indicates the net income produce by the total assets of the company by comparing the net
income of the company with its total assets. In other words it measures how effectively a
company is managing its assets in order to generate net income.
Return On Assets = ( EAT / Total Assets ) * 100

Return On Assets
60
50
40

Return On Assets

30
20
10
0
2013

2014

2015

Interpretation & Analysis:

This ratio measures how efficiently a business can earn a return on its total assets or how
efficiently a company is utilizing its total assets. In the case of Maple Leaf Company , they
utilized their assets well in 2013 and 2015 but not in 2014 as compared to the other two years.
But the actual effectiveness can be measured by comparing this ratio of the company with other
companys ratio in the same industry.
Return On Equity:
This ratio measures ability of a company to generate profits from its shareholders investments. It
indicates that how much profit each dollar of shareholders investment generate.
Return On Equity = ( EAT / Shareholders Equity ) * 100

Return On Equity
60
50
40

Return On Equity

30
20
10
0
2013

2014

2015

Interpretation & Analysis:

This ratio measures how efficiently a company is utilizing its shareholders investments in order
to generate net income. In the case of Maple Leaf Company, it indicates that company is not
utilizing its shareholders investments as it went on decreasing over the years.