PKR in '000

2018 2019
Income Statement

Sales 650 678

Cost of Goods Sols 372 396
Gross Profit 278 282
Operating Expenses 157 172
Operating Profit (EBIT) 121 110
Interest Expenses 23 25
Profit before Taxes (EBT) 98 85
Taxes @ 25% 25 21
Net Profit after Taxes (EAT) 74 64

Balance Sheet

Assets
Current Assets 75 85
Non-current Assets 529 606
Total Assets 604 691

Liabilities and Equity

Current liabilities 50 54
Long-term Debt - @10% 230 250
Total Liabilities 280 304

Share Capital 100 100

Equity Reserves 224 287
Total Equity 324 387

604 691
 2018 2019

Gross Profit ratio 42.77% 41.59%

Operating profit ratio 18.62% 16.22%
Net profit ratio (or Profit Margin) 11.31% 9.40%

Return on Capital Employed (ROCE) 21.86% 17.26%

Return on Assets (ROA) 20.05% 15.91%
Return on Equity (ROE) 22.72% 16.46%

Assets Turnover (based on Total Assets) 1.08 0.98

Assets Turnover (based on Capital Employed) 1.17 1.06

Van Horne's book

Earning Power 13.28% 10.00%
Equity Multiplier (Capital Employed / Equity) 1.71 1.65
Return on Equity (ROE) 22.72% 16.46%

Brigham
Basic Earning Power (BEP) ratio 20.05% 15.91%
Equity Multiplier (Total Assets / Equity) 1.87 1.79
Return on Equity (ROE) 22.72% 16.46%
 PKR in '000
2018 2019

Balance Sheet
Gross Working Capital (PKR in '000)
Assets Net Working Capital (PKR in '000)
Current Assets Current ratio
Cash and Bank 23 32 Quick ratio
Marketable Securities 18 21
Bills Receivables 78 65
Accounts Receivables 112 95
Prepayments 15 20
Inventory 210 235
456 468
Non-current Assets 1,546 1,523
Total Assets 2,002 1,991

Liabilities and Equity

Current liabilities 210 223
Non-current liabilities 1,215 1,200
Total Liabilities 1,425 1,423
Equity 577 568
2,002 1,991
2018 2019 Defensive-interval ratio

Projected cash operating expenditures of a firm for the next year

456 468 Liquid current assets held throughout the year
246 245 What is its Defensive-Interval ratio?
2.17 2.10
1.10 0.96 Solution
Projected daily cash requirements
Defensive-interval ratio (in days)

Notes:
1) This ratio measures the timespan (in days) a firm can operate on present liquid
assets without resorting to next year’s income.

2) The projected cash operating expenditure is based on past expenditures and future
plans. It is equivalent to the cost of goods sold excluding depreciation, plus selling
and administrative expenses and other ordinary cash expenses.

3) Alternatively, a very rough estimate of cash operating expenses can be calculated by

subtracting the non-cash expenses such as depreciation and amortization from total
expenses.

4) Liquid assets are quick assets, i.e., current assets less inventory and prepayments.
 182,500
40,000
??

500
80

e on present liquid

expenditures and future

preciation, plus selling
ses.

nses can be calculated by

amortization from total

ory and prepayments.

 PKR in '000
2017 2018 2019

Income Statement (extract)

Sales 12,540 13,780 14,150
Purchases 7,210 7,815 8,076
Cost of Goods Sold 6,854 7,752 7,913

Balance Sheet (extract)

Accounts Receivables 1,050 1,132 1,256
Inventory 652 715 878
Accounts Payables 713 845 810
 2018 2019

Inventory turnover (in times) using Sales 20.16 17.77

Inventory turnover (in times) using COGS 11.34 9.93
Receivables turnover (in times) 8.53 8.04
Payable turnover (in times) using COGS 9.95 9.56
Payable turnover (in times) using Purchases 10.03 9.76

Turnover period Days 365

Inventory holding period ….. using COGS 32.18 36.74

Receivable Collection period 28.90 30.80
Operating cycle 61.08 67.54
Average Payment period ….. using Purchases 36.38 37.40
Cash cycle 24.70 30.14
 2017 2018 2019

Inventory turnover (in times) using Sales 19.23 19.27 16.12

Inventory turnover (in times) using COGS 10.51 10.84 9.01
Receivables turnover (in times) 11.94 12.17 11.27
Payable turnover (in times) using COGS 9.61 9.17 9.77
Payable turnover (in times) using Purchases 10.11 9.25 9.97

Inventory holding period ….. using COGS 34.72 33.67 40.50

Receivable Collection period 30.56 29.98 32.40
Operating cycle 65.28 63.65 72.90
Average Payment period ….. using Purchases 36.10 39.47 36.61
Cash cycle 29.19 24.18 36.29
 PKR in '000
2018 2019
Income Statement (extract)

Sales
:
:
:
Operating Profit (EBIT) 125 148
Interest Expenses 20 24
Profit before Taxes (EBT) 105 124
Taxes @ 25% 26 31
Net Profit after Taxes (EAT) 78 93

Balance Sheet (extract)

Total Assets 541 678

Other current liabilities 40 54

Long-term Debt - @12% 170 200
Total Liabilities 210 254

Total Equity 331 424

541 678

Additional Information
Market value of Equity 435 578
Depreciation and Amortization 24 33
Annual principal repayment 20 20
Loan instalment including interest 40 44
Annual lease payments 30 30
 2018 2019

Balance sheet Gearing

Equity Gearing 51.36% 47.17%
Capital Gearing 33.93% 32.05%

Khan & Jain's book

Debt to total assets ratio 38.82% 37.46%
Proprietary ratio 61.18% 62.54%

Brigham and Ehrhardt’s book

Market Debt ratio 32.56% 30.53%

Income statement Gearing

Interest cover 6.13 6.17
Cash flow coverage 3.17 3.57

Khan & Jain's book

Total Fixed Charge Cover 2.01 2.21
Total cash flow coverage 2.32 2.62
Debt Service coverage ratio 3.04 3.41
 2018 2019
Relevant Information

Net Profit after Taxes (EAT) 140,000 172,000

Total Ordinary Dividend 65,000 73,000

Book value of equity 685,000 737,000

Number of ordinary shares 50,000 50,000

Market price per share 25.00 27.63

Market value of company debt 1,500,000 1,425,000
Replacement cost of all assets 1,850,000 3,245,000
 2018 2019

Earnings per share (EPS) 2.80 3.44

Earning yield 11.20% 12.45%
Price-Earning ratio (P/E ratio) 8.93 8.03

Dividend per share (DPS) 1.30 1.46

Dividend cover 2.15 2.36
Dividend yield 5.20% 5.28%
Dividend payout ratio 46.43% 42.44%

Earning Retention ratio 53.57% 57.56%

Van Horne's book The market-to-book value ratio is a relative measure of how
option for a company is being valued vis-à-vis its physical ass
Market price per share 25.00 27.63 lower ratio shows that the company earns less than what the
Book value per share 13.70 14.74 markets require. The higher ratio shows that the company ea
substantially more than market expectations. The higher retu
Market-to-Book ratio 1.82 1.87 because of industry attractiveness and/or competitive advan

Market value of company Debt 1,500,000 1,425,000

Market value of Equity 1,250,000 1,381,500 Companies with Q ratios of less than 1.0 shows that these co
worth more dead them alive. The higher the Q ratio, the grea
Total market value of the company 2,750,000 2,806,500 industry attractiveness and/or competitive advantage.
Replacement cost of all assets 1,850,000 3,245,000
Tobin's Q ratio 1.49 0.86
ue ratio is a relative measure of how the growth
being valued vis-à-vis its physical assets. The
he company earns less than what the financial
her ratio shows that the company earns
market expectations. The higher return could be
activeness and/or competitive advantage.

of less than 1.0 shows that these companies are

alive. The higher the Q ratio, the greater the
nd/or competitive advantage.
Alpha Beta Limited
Balance Sheet
As on 30 June
PKR in '000
2018 2019
ASSETS
Current Assets
Cash and Bank 35 42
Marketable Securities 20 12
Bills Receivables 40 53
Accounts Receivables 145 175
Prepayments 15 23
Inventory 190 210
445 515
Non-current Assets
Intangible Assets 125 115
Land and Buildings 360 390
Property, Plant & Equipment 720 840
1,205 1,345

Total Assets 1,650 1,860

LIABILITIES AND EQUITY

Current liabilities
Accounts payable 120 162
Accrued expenses 78 83
Provision for taxation 43 35
Other current liabilities 72 95
313 375
Non-current liabilities
Long-term Debt - @10% 500 520
Long term lease obligations 220 240
Deferred tax liabilities 60 80
Other non-current liabilities 110 125
890 965

Total Liabilities 1,203 1,340

Equity Reserves
Share Capital 100 100
Various Reserves 347 420
447 520
 Total Liabilities and Equity 1,650 1,860

Alpha Beta Limited

Profit & Loss statement
For the year ended on 30 June
PKR in '000
2018 2019

Sales 2,412 2,510

Cost of Goods Sols 1,152 1,253
Gross Profit 1,260 1,257
Operating Expenses 785 814
Operating Profit (EBIT) 475 443
Interest Expenses 95 110
Profit before Taxes (EBT) 380 333
Taxes @ 25% 95 83
Net Profit after Taxes (EAT) 285 250
Common Size Statements [Vertical Analysis]

Alpha Beta Limited

Balance Sheet
As on 30 June
PKR in '000
2018 2019
ASSETS
Current Assets
Cash and Bank 2.12% 2.26%
Marketable Securities 1.21% 0.65%
Bills Receivables 2.42% 2.85%
Accounts Receivables 8.79% 9.41%
Prepayments 0.91% 1.24%
Inventory 11.52% 11.29%
26.97% 27.69%
Non-current Assets
Intangible Assets 7.58% 6.18%
Land and Buildings 21.82% 20.97%
Property, Plant & Equipment 43.64% 45.16%
73.03% 72.31%

Total Assets 100% 100%

LIABILITIES AND EQUITY

Current liabilities
Accounts payable 7.27% 8.71%
Accrued expenses 4.73% 4.46%
Provision for taxation 2.61% 1.88%
Other current liabilities 4.36% 5.11%
18.97% 20.16%
Non-current liabilities
Long-term Debt - @10% 30.30% 27.96%
Long term lease obligations 13.33% 12.90%
Deferred tax liabilities 3.64% 4.30%
Other non-current liabilities 6.67% 6.72%
53.94% 51.88%

Total Liabilities 72.91% 72.04%

Equity Reserves
Share Capital 6.06% 5.38%
Various Reserves 21.03% 22.58%
27.09% 27.96%
 Total Liabilities and Equity 100% 100%

Alpha Beta Limited

Profit & Loss statement
For the year ended on 30 June
PKR in '000
2018 2019

Sales 100% 100%

Cost of Goods Sols 47.76% 49.92%
Gross Profit 52.24% 50.08%
Operating Expenses 32.55% 32.43%
Operating Profit (EBIT) 19.69% 17.65%
Interest Expenses 3.94% 4.38%
Profit before Taxes (EBT) 15.75% 13.27%
Taxes @ 25% 3.94% 3.31%
Net Profit after Taxes (EAT) 11.82% 9.96%
Alpha Beta Limited
Balance Sheet
As on 30 June
PKR in '000
2016 2017 2018 2019
ASSETS
Current Assets
Cash and Bank 28 32 35 42
Marketable Securities 24 15 20 12
Bills Receivables 34 48 40 53
Accounts Receivables 190 165 145 175
Prepayments 18 21 15 23
Inventory 195 160 190 210
489 441 445 515
Non-current Assets
Intangible Assets 165 145 125 115
Land and Buildings 280 310 360 390
Property, Plant & Equipment 560 620 720 840
1,005 1,075 1,205 1,345

Total Assets 1,494 1,516 1,650 1,860

LIABILITIES AND EQUITY

Current liabilities
Accounts payable 110 98 120 162
Accrued expenses 63 85 78 83
Provision for taxation 30 38 43 35
Other current liabilities 60 82 72 95
263 303 313 375
Non-current liabilities
Long-term Debt - @10% 400 450 500 520
Long term lease obligations 180 200 220 240
Deferred tax liabilities 45 55 60 80
Other non-current liabilities 86 98 110 125
711 803 890 965

Total Liabilities 974 1,106 1,203 1,340

Equity Reserves
Share Capital 100 100 100 100
Various Reserves 420 310 347 420
520 410 447 520
 Total Liabilities and Equity 1,494 1,516 1,650 1,860

Alpha Beta Limited

Profit & Loss statement
For the year ended on 30 June
PKR in '000
2016 2017 2018 2019

Sales 1,956 2,195 2,412 2,510

Cost of Goods Sols 879 1,015 1,152 1,253
Gross Profit 1,077 1,180 1,260 1,257
Operating Expenses 695 740 785 814
Operating Profit (EBIT) 382 440 475 443
Interest Expenses 65 75 95 110
Profit before Taxes (EBT) 317 365 380 333
Taxes @ 25% 79 91 95 83
Net Profit after Taxes (EAT) 238 274 285 250
Trend Analysis [Horizontal Analysis]

Alpha Beta Limited

Balance Sheet
As on 30 June
PKR in '000
2016 2017 2018 2019
ASSETS
Current Assets
Cash and Bank 100% 114% 125% 150%
Marketable Securities 100% 63% 83% 50%
Bills Receivables 100% 141% 118% 156%
Accounts Receivables 100% 87% 76% 92%
Prepayments 100% 117% 83% 128%
Inventory 100% 82% 97% 108%
100% 90% 91% 105%
Non-current Assets
Intangible Assets 100% 88% 76% 70%
Land and Buildings 100% 111% 129% 139%
Property, Plant & Equipment 100% 111% 129% 150%
100% 107% 120% 134%

Total Assets 100% 101% 110% 125%

LIABILITIES AND EQUITY

Current liabilities
Accounts payable 100% 89% 109% 147%
Accrued expenses 100% 135% 124% 132%
Provision for taxation 100% 127% 143% 117%
Other current liabilities 100% 137% 120% 158%
100% 115% 119% 143%
Non-current liabilities
Long-term Debt - @10% 100% 113% 125% 130%
Long term lease obligations 100% 111% 122% 133%
Deferred tax liabilities 100% 122% 133% 178%
Other non-current liabilities 100% 114% 128% 145%
100% 113% 125% 136%

Total Liabilities 100% 114% 124% 138%

Equity Reserves
Share Capital 100% 100% 100% 100%
Various Reserves 100% 74% 83% 100%
100% 79% 86% 100%
 Total Liabilities and Equity 100% 101% 110% 125%

Alpha Beta Limited

Profit & Loss statement
For the year ended on 30 June
PKR in '000
2016 2017 2018 2019

Sales 100% 112% 123% 128%

Cost of Goods Sols 100% 115% 131% 143%
Gross Profit 100% 110% 117% 117%
Operating Expenses 100% 106% 113% 117%
Operating Profit (EBIT) 100% 115% 124% 116%
Interest Expenses 100% 115% 146% 169%
Profit before Taxes (EBT) 100% 115% 120% 105%
Taxes @ 25% 100% 115% 120% 105%
Net Profit after Taxes (EAT) 100% 115% 120% 105%