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    Method of Analysis

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    Abdullah Khan
    The document analyzes and compares the financial ratios and performance of three textile mills - Kohinoor, Kohat, and Crescent - for the fiscal year 2019. Key findings include: 1) Kohinoor had the highest return on equity at 10.3% while Kohat and Crescent had 3.92% and 3.01% respectively. 2) Using the Dupont framework, Kohinoor's higher profitability ratio contributed to its superior return on equity despite lower efficiency and leverage ratios compared to the other mills. 3) Kohat had the shortest operating cycle at 78.5 days, indicating more efficient use of working capital compared to Kohinoor and Crescent.

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    Method of Analysis

    Uploaded by

    Abdullah Khan
    26 views9 pages
    The document analyzes and compares the financial ratios and performance of three textile mills - Kohinoor, Kohat, and Crescent - for the fiscal year 2019. Key findings include: 1) Kohinoor had the highest return on equity at 10.3% while Kohat and Crescent had 3.92% and 3.01% respectively. 2) Using the Dupont framework, Kohinoor's higher profitability ratio contributed to its superior return on equity despite lower efficiency and leverage ratios compared to the other mills. 3) Kohat had the shortest operating cycle at 78.5 days, indicating more efficient use of working capital compared to Kohinoor and Crescent.

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    Ratio Analysis of 3 companies plus common and DuPont framework.

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    The document analyzes and compares the financial ratios and performance of three textile mills - Kohinoor, Kohat, and Crescent - for the fiscal year 2019. Key findings include: 1) Kohinoor had the highest return on equity at 10.3% while Kohat and Crescent had 3.92% and 3.01% respectively. 2) Using the Dupont framework, Kohinoor's higher profitability ratio contributed to its superior return on equity despite lower efficiency and leverage ratios compared to the other mills. 3) Kohat had the shortest operating cycle at 78.5 days, indicating more efficient use of working capital compared to Kohinoor and Crescent.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    26 views9 pages

    Method of Analysis

    Uploaded by

    Abdullah Khan
    The document analyzes and compares the financial ratios and performance of three textile mills - Kohinoor, Kohat, and Crescent - for the fiscal year 2019. Key findings include: 1) Kohinoor had the highest return on equity at 10.3% while Kohat and Crescent had 3.92% and 3.01% respectively. 2) Using the Dupont framework, Kohinoor's higher profitability ratio contributed to its superior return on equity despite lower efficiency and leverage ratios compared to the other mills. 3) Kohat had the shortest operating cycle at 78.5 days, indicating more efficient use of working capital compared to Kohinoor and Crescent.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 9

    Kohat Textile Mill (2019)

    1-Liquiditity Ratio:

    Current Ratio: 1159022/1225597 = 0.94

    Acid Test Ratio: 1159022-668237/1225597 = 0.40

    2-Financial Leverage Ratio:

    Debt to Equity: 1806290/1707895 = 1.05

    Debt to Total Asset: 1806290/3514185 = 0.51

    Total Capitalization: 1806290/2288588 = 0.78

    3- Coverage Ratio:

    Interest Coverage: No interest is given in the statement.

    4-Activity Ratio:

    Receivable Turnover: 2966457/17086 = 173.6

    Average Collection Period: 365/173.6 = 2.1

    Payable Turnover: 2656307/394290 = 6.7

    Payable Turnover in Days: 365/6.7 = 54.4


    Inventory Turnover: 2656307/36061 = 73.6

    Total Asset Turnover: 2966457/3514185 = 0.84

    5-Profitability Ratio:

    Gross Profit Margin: 310150/2966457*100 = 10.4

    Net Profit Margin: 66965/2966457*100 = 2.2

    Return on Investment: 66965/3514185*100 = 1.9

    Return on Equity: 66965/1707895*100 = 3.92

    Kohinoor Textile Mills (2019)

    1-Liquidity Ratio:

    Current Ratio: 7034046/6450732 = 1.09

    Acid Test Ratio: 7034046-565437/6450732 = 1.01

    2-Financial Leverage Ratio:

    Debt to Equity: 8579763/16966815 = 0.5

    Debt to Total Assets: 8579763/25546578 = 0.33

    Total Capitalization: 8579763/19095846 = 0.44

    3-Coverage Ratio:

    Interest Coverage: No interest is given in the statement.


    4-Activity Ratio:

    Receivable Turnover: 21220135/536987 = 39.5

    Average Collection Period: 365/39.5 = 9.2

    Payable Turnover: 17659063/2133377 = 8.2

    Payable Turnover in Days: 365/8.2 = 44.5

    Inventory Turnover: 17659063/565437 = 31.2

    Total Asset Turnover: 21220135/25546578 = 0.8

    5-Profitability Ratio:

    Gross Profit Margin: 3561072/21220135*100 = 16.7

    Net Profit Margin: 1750644/21220135*100 = 8.2

    Return on Investment: 1750644/25546578*100 = 6.8

    Return on Equity: 1750644/16966815*100 = 10.3

    Crescent Textile Mills:

    1-Liquiduty Ratio:

    Current Ratio: 6712671/8343855 = 0.80

    Acid Test Ratio: 6712671-265357/8343855 = 0.77


    2-Financial Leverage Ratio:

    Debt to Equity: 9464068/7906735 = 1.19

    Debt to Total Asset: 9464068/17370803 = 0.54

    Total Capitalization: 9464068/9026948 = 1.04

    3-Coverage Ratio:

    Interest Coverage: No interest is given in the statement.

    4-Activity Ratio:

    Receivable Turnover: 13946144/290591 = 47.9

    Average Collection Period: 365/47.9 = 7.6

    Payable Turnover: 12308973/1865597 = 6.5

    Payable Turnover in Days: 365/6.5 = 56.1

    Inventory Turnover: 12308973/265357 = 46.3

    Total Asset Turnover: 13946144/17370803 = 0.8

    5-Profitability Ratio:

    Gross Profit Margin: 1637171/13946144*100 = 11.7

    Net Profit Margin: 238589/13946144*100 = 1.71


    Return on Investment: 238589/17370803*100 = 1.37

    Return on Equity: 238589/7906735*100 = 3.01

    Method of Analysis: Common Size Statement:

    Profit Margin

    Fy2019 Raw Financial Numbers Common Size

    Total Revenue Income after tax Profit Margin%

    Kohinoor 21220135 1750644 8.2

    Crescent 13946144 238589 1.7

    Kohot 2966457 66965 2.2

    Return on Equity:

    Kohinoor Crescent Kohat

    Total Assets 25546578 17370803 3514185

    Sales 21220135 13946144 2966457

    Net Income 1750644 238589 66965

    Net Income/Stockholder Equity

    Kohinoor: 1750644/16966815 = 10.3

    Kohat: 66965/1707895 = 3.92


    Crescent: 238589/7906735 = 3.01

    Not Good 10% Very Good 20%

    Kohat 3.92% Kohinoor 10.3%

    Crescent 3.01%

    Fiscal Year 2019 Net Income Equity Return on Equity


    Kohinoor 1750644 16966815 10.3
    Kohat 66965 1707895 3.92
    Crescent 238589 7906735 3.01

    Dupont Framework:

    Leverage Ratio: Total Assets/Equity

    Efficiency Ratio: Total Sales/Total Assets

    Profitability Ratio: Net Income/Sales

    Overall Profitability Efficiency Leverage


    ROE
    1750644 21220135 25546578
    21220135 25546578 16966815

    Kohinoor 10.3 = 8.2% x 0.8% X 1.5%

    66965 2966457 3514185


    29664457 3514185 1707895

    Kohat 3.92 = 2.2% x 0.84% X 2.0%

    238589 13946144 17370803


    13946144 17370803 7906735

    Crescent 1.7% x 0.8% x 2.1%

    As shown above in the DuPont framework only in profitability ratio the Kohinoor Textile has a higher
    %,but in efficiency Kohat has a higher % and leverage ratio Crescent Textile have a higher %. Number
    does not show the exact facts we are looking for heree the dupont framework show how even in low
    amount company can have a higher % in comparison.

    Common Size Income Statement:

    Kohinoor Kohat Crescent

    Revenue 100% 100% 100%

    COGS 83.2% 89.5% 88.2%


    Distribution Expense 2.6% 7.6% 4.8%

    Administration Expense 2.6% 2.4% 2.4%


    Other Expenses 1.7% 0.43% 0.29%

    Net Income 8.2% 2.2% 1.7%

    COGS of Kohat is much higher than the Kohinoor, so this show that Kohat textile cost are higher than
    Kohinoor during the manufacturing of the products. So by controlling it there can increase their net
    profit just by having less expense. Even in distribution expense KOhat has a higher % due to spending
    much more on distribution. Kohinoor have more other expenses than the two other Mills.

    Common Size Balance Sheet:


    Kohinoor Kohat Crescent

    Cash 1.01% 0.24% 0.03%

    Receivable 2.5% 0.57% 2.08%

    Inventory 2.6% 1.2% 1.9%

    Property, Plant & 41.9% 79.1% 48.2%


    Equipment
    Total Assets 48.01% 81.11% 52.21%

    Just by looking at the above sheet the net % of the total assets of Kohat are much higher than of
    Kohinoor, and after that Crescent Mills. Kohat Mills has the higher % in property, plant and equipment
    column.

    Operating Cycle:

    Kohat:

    Inventory Turnover: 2656307/36061 = 73.6

    Average Collection Period: 365/73.6 = 4.9

    Operating Cycle: 78.5

    Kohinoor:

    Inventory Turnover: 17659063/565437 = 31.2

    Average Collection period: 365/31.2 = 11.6

    Operating Cycle: 42.8


    Crescent:

    Inventory Turnover: 12308973/265357 = 46.3

    Average Collection Period: 365/46.3 = 7.8

    Operating Cycle: 54.1

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