Ratio Analysis of Kohinoo R Sugar Mill: Financial Managemant

Institute of Business Management
Korangi Creek, Karachi-75190, Pakistan
UAN (9221)111-002-004, Fax: (9221) 509-0968
Http://www.iobm.edu.pk
Ratio
Analysis of
FINANCIAL
KOHINOO
MANAGEMANT
R Sugar
Mill
SUBMITTED TO:
Miss Asiya Shirazi
SUBMITTED BY:
PRINCE KUMAR
ID: 8834
TREND ANALYSIS (INTER AND INTRA ANALYSIS)
1. Current Ratio
Current ratio of Kohinoor sugar mill from year 2006 to 2008 were 0.85, 0.67, 0.67
while the industry average is 0.87 here we can see that in the year 2006 company is
performing nearly up to the industry averages and that is good sign for company but
in 2007 and 2008 the current ratio of the firm is much lesser from the industry
averages this is because of current asset was procure up to the level of industry and
company pay off the long term liabilities which were long term
2. Quick Ratio
Companies quick ration in 2006 to 2008 were 0.37, 0.33, 0.25 respectively while
industry average is 0.46. Which suggest despite the fact of having good current ratio
company is maintaining more of merchandize inventory than the industry which is
not a good sign.
3. Receivable turnover days

As compared to the industry average of 16.97 the receivable turnover days of
Kohinoor sugar mill were 30.28, and 39.14 in the year 2006 and 2007 which
suggest the company not collecting their receivables with in a required time period
and that is the bad sign for the company however their were no any trade debits in
the year 2008.
4. Inventory Turnover Days

The inventory turnover ratio of the Kohinoor sugar ill were 103.02, 81.64, 142.38
as compared to the industry average of approximately 82 days. This shows that in
the year 2006 and 2008 company is taking more time in selling its finished goods
stock as compared to the industry average. This is because the company is not
providing enough credit time period than the industry averages and also that
company is heavily investing on inventory maintain which should be avoided.
5. Account Payable turnover Days

From year 2006 to 2008 the company account payable ratio for the Kohinoor sugar
mill were 47.28, 20.07 and 60.31 respectively with the industry norms of 78.86 days
which shows that the company paying the cash to the creditors before the time and
that can be bad for the company. But on the other hand it can be good for the
company because it is creating its credibility in the creditor minds and company
credit rating will also improved and more creditors will be willing to supply the raw
material to the company or even company can avail discounts from the suppliers
6. Operating Cycle
Industry average is 98.75 days while the company averages from 2006 to 2008 were
133.31, 120.87, 142.38 days respectively. Company operating cycle is very high as
compared to the industry because of taking more time in converting its finished
goods to revenue the company should work on it because it would certainly affect
its cash cycle. And company is also having less cycle each year.
7. Cash Cycle
Industry average is 19.89 days while the company averages from 2006 to 2008 were
86.03, 100.71 and 82.07 days respectively. Company cash cycle is not as good as
compared to the industry because of slow collection from customers and taking
lesser time in paying off to creditors
8. Debt Ratio
As the company debt ratio for last three years from 2006 to 2008 were 0.55, 0.67,
0.73 as compared to the industry norm of 1.15 which shows company debt ratio is
increasing through our the years and company is moving towards better conditions
9. Earning Per Share
As the company earning per share ratio for last three years from 2006 to 2008 were
0.86, -13.54, -4.08 as compared to the industry norm of 0.91 this shows that in the
year 2007 and 2008 the earning per share ratio is negative because of the
government restrictions but in year 2006 it performs with the industry norms.
10. Gross Profit Margin

From 2006 to 2008 the company gross profit ratios were 0.15, -0.05, 0.04
respectively as compared to the industry norm of 0.11 which means that company
had perform below the industry average in the year 2007 and 2008 because either
there was high cost of production due to inflation or raw material used was of sub
standard quality. This could also be because company suppliers are now supplying
them at a bit higher prices.
11. Net Profit Margin

As The Kohinoor Net Profit Margin Ratio For Last Three Years From 2006 To 2008
Were -0.05, -0.20, 0.04 As Compared To The Industry Averages Of 0.01 which shows
In 2006 and 2007 the company is not earning a net profit this may be due to
government restrictions, but in 2008 if we see the company is performing far better
and continuously improving on limiting its expenses which is a good sign for
company
12. Return on Equity

As the company return on equity for last three years from 2006 to 2008 were 0.04,
-2.63, and 3.84 respectively as compared to the industry norm of 0.26 which shows
that there is a negative earning in recent two years.
13. Price Earning Ratio

From 2006 To 2008 The Company Price Earning Ratio Were 23.30, -2.22, -8.57
Respectively As Compared To The Industry Norm Of 7.51 Which Means That
Company Is Better In Performance In The Year 2006 And Negative Earning In 2008
And 2007
14. Dividend Per Share

Company has paid the dividend only once during the last three financial years and
that was in last financial year in 2008 because before that not only the company but
the industry was in crisis and due to restriction and increase in expenses the
company and the industry as in heavy losses but company has also performed well
in this part because it has paid dividend of 27.56 per share as compared to the
industry average of 3.05 but by paying only once we are unable to firmly conclude
that they are much better.
Du point analysis
2008 2007 2006
1. ROA -0.02079 -0.079 0.00481
2. ROE -3.84 -2.63 0.04
WHER
E
ROA=NET PROFIT MARGIN *TOTAL ASSET TURNOVER
ROE=ROA * EQUITY MULTIPLIER
Conclusion
From creditor’s point of view:
The company is highly risky. Its debt to equity ratio has increased significantly over the years and
company is not efficiently utilizing its current assets so this is not a good sign for creditors to invest.
From investor’s point of view:

Even due to not efficiently utilizing its current assets by company& it has tied up huge amount of
its current assets in its operations which results the company is not liquid enough to pay dividends
to its share holders.
From management point of view:

The operational efficiency of company has decreased significantly. Not only the inventory and
receivable turnover has increased but also the operations cycle has increased which is again bad
sign for company.
COMMON SIZE ANANLYSIS % OF BALANCESHEET
Balance Sheet as at sep 30 2008 2007 2006

ASSETS
N O N -CURRENT ASSETS
Property, plant and
equipment 72.80 81.05 77.03
Long-term deposits
0.07 0.13 0.15
Deffered tax Asset - _
0.49
Total Fixed Assets
73.36 81.18 77.18
CURRENT ASSETS
Stores, spare parts and loose
tools 5.59 4.87 4.99
Stock in trade
16.73 9.47 12.94
Trade debts
0.24 0.25
Loans and advances
1.88 2.15 2.00
Short term deposits and
prepayments 0.07 0.02 0.02
Other receivables
0.68 0.79 0.86
Taxation
1.29 1.22 1.19
Cash and bank balances
0.41 0.06 0.56
Total Current Assets
26.64 18.82 22.82
Total Assets
100.00 100.00 100.00
EQUITY AND LIABILITIES

SHARE CAPITAL AND
RESERVES
Share capital
5.09 5.87 5.61
Capital reserve - premium on
right shares 1.25 1.45 2.43
Revenue reserve
2.89 3.33 3.66
(8.70) (7.63) 0.35

Total Equity
0.54 3.02 12.05
Surplus on revaluation of
land 26.41 30.42 33.44
NON-CURRENT
LIABILITIES
Long term finances
24.13 24.78 19.29
Liabilities against assets
subject to finance lease 0.15 0.42 0.71
Sponsors’ loan
9.05 10.45 5.20
DEFERRED TAXATION
- 2.63 2.44
LONG TERM PROVISION
0.06 0.07 0.08
Total non Current
Liabilities 33.39 38.35 27.72
CURRENT LIABILITIES
Trade and other payables
26.22 9.88 4.23
Accrued mark-up
1.75 1.24 1.36
Short-term borrowings
11.16 12.19 17.42
Current portion of long term
liabilities 0.53 4.89 3.77
Total Current Liabilities
39.66 28.21 26.79
Total Equity and Liabilitiy
100.00 100.00 100.00
Profit & Loss

Account
Profit & loss account 2008 2007 2006
NET SALES 100 100 100

COST OF SALES -96.3355 -105.243 -84.9304
GROSS (LOSS)/PROFIT 3.664489 -5.24321 15.0696
Distribution costs 0.493024 0.209914 0.208206
Administrative expenses 5.775787 6.833308 5.344193
Other operating expenses 0.042984 0.054833 0.315815
Other operating income 1.394602 1.935609 0.514448
Share of profit/(loss) from -1.2527 -10.4057 9.715836

an associate
Finance costs 9.653355 7.947581 5.671515
(LOSS) / PROFIT BEFORE -10.9061 -18.3532 4.044321

TAXATION
Taxation 6.235723 1.406341 3.15294
(LOSS) / PROFIT AFTER -4.67033 -19.7596 0.891381

TAXATION
Common size analysis:
 Non current assets increases in 2007 after that it decreases from approximately 81
to 72 in 2008.
 Other receivables decreases through out the period as the sales also decline.
 The company significantly increased its investments in advances and loans in 2007
which is slightly lowered down in 2008.
 Trade payable increases as the period goes on ward this is due to company is
purchasing stock.
 The short term borrowings decreases over the period of time due to increases in
long tem finance.
 Cost of sale increases much in 2007 which is 105% but it decline to 96%. Due to
which company is passing through losses.
 Due to increase in cost, gross profit decreases in 2007 but once again it increases as
also cost decreases.
 Administrative and general as well other operating expenses increases in 2007 but
in 2008 these declines slightly.
 In 2006 company earn a profit which is mainly due to less cost but In 2007 and
2008 company faces a heavy loss as cost increased.

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Institute of Business Management

Korangi Creek, Karachi-75190, Pakistan

UAN (9221)111-002-004, Fax: (9221) 509-0968

3. Receivable turnover days

4. Inventory Turnover Days

5. Account Payable turnover Days

10. Gross Profit Margin

11. Net Profit Margin

12. Return on Equity

13. Price Earning Ratio

14. Dividend Per Share

1. ROA -0.02079 -0.079 0.00481

2. ROE -3.84 -2.63 0.04

ROA=NET PROFIT MARGIN *TOTAL ASSET TURNOVER

ROE=ROA * EQUITY MULTIPLIER

From investor’s point of view:

From management point of view:

Balance Sheet as at sep 30 2008 2007 2006

EQUITY AND LIABILITIES

(8.70) (7.63) 0.35

Profit & Loss

NET SALES 100 100 100

GROSS (LOSS)/PROFIT 3.664489 -5.24321 15.0696

Distribution costs 0.493024 0.209914 0.208206

Administrative expenses 5.775787 6.833308 5.344193

Other operating expenses 0.042984 0.054833 0.315815

Other operating income 1.394602 1.935609 0.514448

Share of profit/(loss) from -1.2527 -10.4057 9.715836

(LOSS) / PROFIT BEFORE -10.9061 -18.3532 4.044321

(LOSS) / PROFIT AFTER -4.67033 -19.7596 0.891381

Common size analysis:

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