Financial Analysis of Companies

Sector : Textile
Firm : Hira Textiles( HIRAT)
Financial Ratio:
Relates two accounting numbers and is obtained by dividing one number by the

other . It includes two types of comparisons . External and internal comparison

LIQUIDITY RATIOS :
Current Ratio :
Shows firm’s ability to cover it’s current liabilities with its current assets .
Current Ratio = current Assets
Current Liabilities

2020 2019 2018 2017 2016

Current 815828 1164764 2257623 2627405 2255468
Assets
Current 1776007 2459510 2280329 2951446 2464531
Liabilities
Current Ratio 0.46 0.47 0.99 0.89 0.92

Acid -Test ( Quick ) Ratio :

Shows a firm’s ability to meet current liabilities with its most liquid assets
Acid -Test (Quick) Ratio = Current Assets-Inventory
Current Liabilities
2020 2019 2018 2017 2016
Current 815828 1164764 2257623 2627405 2255468
Assets
Current 1776007 2459510 2280329 2951446 2464531
Liabilities
Inventory 47,189,641 85,680,534 34,182,034 46,219,026 40,282,337
Quick Ratio 27.03 35.31 15.98 16.55 17.26
Indication:
Strong Current Ratio and Weak Acid Test Ratio predict potential problem in inventory
account.
Financial Leverage Ratios
Debt to Equity Ratio :
Debt to equity Ratio shows extent to which the firm is financed by debt .
Debt – to – Equity Ratio = Total Debt
Shareholders Equity

2020 2019 2018 2017 2016

Total Debt 114122355 112250006 112768241 42607700 46598421
Shareholders 413000000 97000000 1947,8600 2497,8640 1945,2370
Equity
Debt Equity 0.27 1.1 5.7 1.7 2.4
Ratio

Debt -to-Total Asset Ratio :

It shows the percentage of firm’s asset’s that are supported by debt financing
Debt -to – Total Asset Ratio = Total Debt
Total Assets

2020 2019 2018 2017 2016

Total Debt 114122355 112250006 112768241 42607700 46598421
Total Asset 3221975 3713199 5434614 5967465 5514606
Debt to total 35.42 30.23 20.75 7.14 8.45
Asset Ratio

Total Capitalization Ratio :

It shows importance of long term debt to long term financing of firm .
Total Capitalization Ratio = Total Debt
Total Capitalization

2020 2019 2018 2017 2016

Total Debt 114122355 112250006 112768241 42607700 46598421
Total 1210231 1219777 3075569 2923908 2411362
Capitalization
Total 94.30 92.02 36.67 14.57 19.32
Capitalization
Ratio

Coverage Ratios
Interest Coverage Ratio :
It shows the firm’s ability to cover interest expense
Interest Coverage Ratio = EBIT
Interest Charges

2020 2019 2018 2017 2016

EBIT 101M 1101M 225M 176M 328.32M
Interest 134M 198M 205M 220M 228M
Charges
Interest 2.75 9.42 3.64 0.80 1.44
coverage
Ratio

Indication :
Falling Coverage Ratios Means that low earning may be a potential problem
Activity Ratios
Receivable Turnover :
Indicates quality of receivables and how successful a firm is in its collection
Receivable Turnover Ratio = Annual Net Credit Sales
Receivable
AVG collection Period :
Average no of days in which the receivable are outstanding
AVG collection Period = Days in a Year
Receivable Turnover
2020 2019 2018 2017 2016
Annual Net 1462280000 2650360000 2161250000 3350350000 3535360000
Credit Sales
Receivable 263M 766M 175M 185M 128M
Receivable 5.56 3.46 12.35 18.11 27.62
Turnover
Ratio
AVG 65 105 29 20 13
collection
Period Ratio

Payable Turnover Ratio

Indicates the promptness of payment to suppliers by firm
Payable Turnover Ratio = Annual Credit Purchases
Account Payable
PT in days
It’s the AVG no of days that payables are outstanding
PT in days = Days in the Year
Payable Turnover
2020 2019 2018 2017 2016
Annual 4015M 4993M 4340M 3118M 2665M
Credit
Purchases
Account 182M 699M 234M 353M 218M
Payable
Payable 12.22 8.8 18.58 7.14 22.06
Turnover
Ratio
PT in days 30d 41d 20d 51d 16.5d

Inventory Turnover Ratio :

Indicates the effectiveness of inventory management practices of the firm
Inventory Turnover Ratio = Cost of Goods Sold
Inventory
2020 2019 2018 2017 2016
Cost of goods 4015M 4993M 4340M 3118M 2665M
sold
Inventory 47189641 85680534 34182034 46219026 40282337
Inventory 5.07 10.51 1.26 1.67 2.26
turnover
Ratio

Total Asset Turnover :

Its the overall effectiveness of the firm in utilizing assets to generate sales
Total assets Turnover Ratio = Net. Sales
Total assets
2020 2019 2018 2017 2016
Net sales
Total assets 3221975 3713199 5434614 5967465 5514606
Total asset 0.45 0.71 0.40 0.56 0.64
turnover
Ratio

Profitability Ratios
Gross Profit Margin Ratio
It indicates the efficiency of operations and firm’s pricing policy
Gross Profit margin = Gross Profit
Net sales
2020 2019 2018 2017 2016
Gross Profit 66415 1061512 153669 255013 334666
Net sales 1463374 2645989 2171757 3361275 3523396
Gross Profit -4.54 -40.12 -7.08 7.59 9.5
Ratio
Net Profit Margin Ratio
It indicates firm’s profitability after considering all income taxes and expenditure
Net Profit Margin Ratio = Net profit after sales
Net sales
2020 2019 2018 2017 2016
Net profit 303789 2015842 546949 7456 93537
after tax
Net Sales 1463374 2645989 2171757 3361275 3523396
Net Profit 20.76 76.18 25.19 0.22 2.65
Margin Ratio
Return On Investment (ROI)
It indicates profitability on assets of firm after all expenses and taxes
Return on Investment Ratio ( ROI )= Net Profit after taxes
Total assets
2020 2019 2018 2017 2016
Net profit 303789 2015842 546949 7456 93537
after tax
Total assets 3221975 3713199 5434614 5967465 5514606
Return on 0.094 0.542 0.1006 0.00125 0.017
investment
(ROI)
Return On Equity ( ROE)
It indicates the profitability to shareholders of the firm after all expenses and
taxes Return on Equity ( ROE) = Net Profit after Taxes
Stakeholders Equity

Earning Power
Earning Power = Sales Profitability × Asset Efficiency
2020 2019 2018 2017 2016
Sales 20.75 76.18 25.18 0.22 2.6
profitability 2020 2019 2018 2017 2016
Net profit 303789 2015842 546949 7456 93537
Asset 0.45 0.71 0.40 0.56 0.64
after taxes
efficiency
Stakeholders 68982 97439 1947860 2497864 1945237
Earning 9.34 54.08 10.072 0.123 1.664
Equity
Power

Return on 4.4 20.6 0.280 0.003 0.048

equity Ratio
Equity Multiplier

Equity Multiplier = Total asset

Shareholders Equity

Return On Equity = Net Profit margin × Total asset turnover × Equity Multiplier

2020 2019 2018 2017 2016

Total assets 3221975 3713199 5434614 5967465 5514606
Shareholders 68982 97439 1947860 2497864 1945237
Equity
Equity 46.7 38.1 2.79 2.39 2.83
Multiplier
Total asset 0.45 0.71 0.40 0.56 0.64
turnover
Net profit 20.76 76.18 25.19 0.22 2.65
margin
Return on 87.2 1648 101.5 0.015 2.768
equity

Indication :
Falling probability Ratios predict that COGS and administrative expenses are too high and
could be a potential problem
Growth Ratios
Growth Ratio
Growth Ratio indicates firm’s growth of any activities
Growth Ratio =(Value of t+1)-(Value of t)
(Value of t)x100
2020 2019 2018 2017 2016
Growth Ratio -44.69 22.47 -35.47 -4.98 -2.79

Stock Ratios
Dividend/Share
(Div.) = Distributed Profit
No .of Shares
Distributed profit of HIRA textiles is zero because the company is facing loss for the past few
years so the value of dividend would be zero
2020 2019 2018 2017 2016
Dividend / 0 0 0 0 0
Share

Price to Earning Ratio ( P/E )

 P/E=Marketing Price
Earning
2020 2019 2018 2017 2016
P/E -0.12 -0.69 100.82 8.45 15.85

Book Value
Book Value = Shareholders Equity
# of common Stock
2020 2019 2018 2017 2016
Book Value O.80 -1.13 22.5 28.85 28.8

Market Price to Book Value

Market Price to book value Ratio = Market Price
Book Value
2020 2019 2018 2017 2016
Market Price 3.68x -4.34x 0.39x 0.42x -
to book value

Paid Price Ratio :

Paid Price Ratio = Paid Price
Share
Paid Price value is zero in Hira Textiles So
2020 2019 2018 2017 2016
Paid Price 0 0 0 0 0
Ratio
Earning / Share Ratio :

2020 2019 2018 2017 2016

Earning/Shar 3.51 23.28 6.32 0.09 1.08
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