RATIOS ANALYSIS

Ratio analysis is a useful way of gaining a "snapshot"

picture of a company.

These ratios can be

analyzed to identify the company's strengths and weaknesses and useful insights can be gained through the process. Financial ratios are generally grouped together by their purpose. Although there are many of these classifications with some of the key users for the different types of ratios:

Liquidity (Short-term creditors) Debt (Potential lenders or bondholders) Activity (Top management of the company) Profitability (Both existing and potential investors in the company's common stock)

RATIOS ANALYSIS

INTRODUCTION

A premier name in the field of cement is stock exchanges. The plant is located about 52 kilometers from Peshawar (NWFP) near

Maple Leaf Cement is committed to run an aims to employs cutting edge technology to

manufacturing was incorporated in 1981 and efficient and profitable business and therefore listed on the Karachi, Lahore and Islamabad ensure energy efficiency and the optimum use

of natural resources. The

visionary and

Nowshera. Cherat Cement is manufacturing experienced management drives the company high quality grey Portland cement on the most modem and computerized production facilities. The shareholders' equity of the company as at June 30, 2002 was Rs. 916 million and it has total assets of Rs.1, 631 million, with turnover exceeding Rs.1, 422 million to set goals that position Maple Leaf ahead of the competition and as a key player in the cement industry.

RATIOS ANALYSIS

LIQUIDITY RATIOS

Current ratio
The current ratio is another test of a company's financial strength. It calculates how many PKR in assets are likely to be converted to cash within one year in order to pay debts that come due during the same year. Current Ratio= Current Assets Current Liabilities

Year 2009

Current Assets 1,343,431

Cherat Current Liabilities 1,070,994

Current Ratio 1.25

Year 2009

Current Assets 5,214,877

Maple Leaf Current Liabilities 9,962,884

Current R a tio 0.52

Current ratio of Cherat is more than Maple leaf. This shows that Cherat has more current assets against its current liabilities. So, current ratio of Cherat is much better than Maple leaf

Quick Ratio
In finance, the Acid-test or quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to immediately extinguish or retire its current liabilities. Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values. Quick Ratio = Quick Assets Current Liabilities
Cherat Current Quick Assets Liabilities 89,546 1,070,994 Maple Leaf Current Liabilities 9,962,884

Year 2009

Quick Ratio 0.08

Year

Quick Assets

Quick Ratio 0.13

Quick

2009

1,296,441

RATIOS ANALYSIS

ratio of Maple leaf is more than the quick ratio of Cherat. This shows that even after subtracting inventories, Maple leaf has more current assets against its current liabilities. So, quick ratio of Maple leaf is better than that of Cherat.

Debt Ratios

Debt ratio
Quick Ratio = Total Liabilities Total Assets

Year 2009

Total Liabilities 2,475,106

Cherat Total Assets 4,743,510

Maple Leaf Debt Ratio 0.52 Year 2009 Total Liabilities 18,943,037 Total Assets 26,660,838 Debt Ratio 0.71

As debt ratio of Cherat is less than the debt ratio of Maple leaf. This shows that Cherat has taken less debt as compared to Maple leaf. So here the performance of Cherat is good.

Interest Earned Ratio

A measure of the firms ability to meet annual interest payment
Cherat Finance cost 114,357

Year 2009

EBIT 371,290

Interest Coverage Ratio 3.25

Year 2009

EBIT 2,482,590

Maple Leaf Finance cost 3,400,241

Interest Coverage Ratio 0.73

As TIE ratio of Cherat is more than that of Maple leaf. This shows that earning of Cherat is good and is financially strong as compared to Maple leaf.

RATIOS ANALYSIS

ACTIVITY RATIOS

Total Assets Turnover

TATO= Sales Total assets

Where asset turnover tells an investor the total sales for each $1 of assets, return on assets, or ROA for short, tells an investor how much profit a company generated for each $1 in assets.

Year 2009

Net Sales 4,567,409

Cherat Total Assets 4,743,510

Assets Turnover Ratio 0.96

Year 2009

EBIT 371,290

Maple Leaf Finance cost 114,357

Interest Coverage Ratio 3.25

As total assets turnover ratio of Maple leaf is greater than that of Cherat. This shows that Maple leaf has more sales against its total assets. So, the performance of Maple leaf is much better than that of Cherat

Inventory Turnover

Year 2009

CGS 3,896,647

Cherat Avg Inventory 244,039.5

in times 15.97

in days 23

Year 2009

CGS 10,296,865

Maple Leaf Avg Inventory 542,433.0

in times 18.98

in days 20

As sales of Cherat are more than the sales of Maple leaf. It means that Cherat can convert its inventories into sales more easily and inventory turnover ratio of Cherat is greater than Maple leaf which shows that management of Cherat is performing well as compared to the management of Maple leaf.

RATIOS ANALYSIS

PROFITABILTY RATIOS

Return on Equity
The return on assets (ROA) percentage shows how profitable a company's assets are in generating revenue. ROE = NI yquuqE nommoC

Year 2009

Net Income (982,970)

Maple Leaf Avg Shareholders Equity 7539345.0

ROE 13%

Year 2009

Net Income 159,287

Cherat Avg Shareholders Equity 2,123,255.0

ROE 7%

ROE of Cherat is greater than the ROE of Maple leaf which shows that the performance of Cherat is better than Maple leaf.

Return on Total Assets

Return on Assets = NI Total Assets

Year 2009

Net Income 159,287

Cherat Avg Total Assets 4,562,891.5

Maple Leaf ROA 3% Year 2009 Net Income (982,970) Avg Total Assets 25,906,199.5 ROA -4%

As ROA of Cherat is greater than Maple leaf. This shows that net income of Cherat is more against its total assets. So, the performance of Cherat is more satisfactory.

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Profit Margin on Sales

Profit margin on sales = NI Sales

Cherat Year 2009 Operating profit 371,290 Net Sales 4,567,409 OPR 8% Year 2009 Operating profit 2,482,841

Maple Leaf Net Sales 15,251,374 OPR 16%

As profit margin on sales of Maple leaf is more than that of Cherat. It shows that net income of Maple leaf is more against its sales as compared to Cherat. So, according to this ratio performance of Maple leaf is better than Cherat

Basic Earning Power

The basic earning power ratio (BEP ratio) compares earnings apart from the influence of taxes or financial leverage, to the assets of the company

BEP=

EBIT Total Assets

Cherat Year 2009 EBIT 371,290 Total Assets 4,743,510 BEP 0.08 Year 2009 EBIT 2,482,590

Maple Leaf Total Assets 26,660,838 B EP 0.09

As BEP of Cherat is more than the BEP of Maple leaf. This shows that Cherat is earning more profit against its total assets. So, this ratio shows that performance of Cherat is better than that of Maple leaf.

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MARKET VALUE RATIOS

Earnings per Share

Year 2009

Net Income 159,287

Cherat Avg Shares Outstanding 95,580,008

EPS 1.66

Year 2009

Net Income (982,970)

Maple Leaf Avg Shares Outstanding 372,263,400.0

EPS (2.64)

Price/earnings ratio

This ratio shows the dollar amount investor pay for 1dollar of current earnings.

Cherat Year 2009 Market Price/Share 159,287 EPS 1.66 P/E Ratio 8.27 Year 2009 Market Price/Share 4.32

Maple Leaf EPS (2.64) P/E Ratio (1.64)

As earning per share of Cherat is 8.27 and earnings per share of Maple leaf is (1.64). This shows that performance of Cherat is better than that of Maple leaf because earning per share of Cherat is more as compared to Maple leaf.