Financial Analysis

Financial Management
(Final Project)
Submitted To
Maam Huma Ayub
Submitted By
Mamoona Naz
Anum Javed
Sumra Arif
Anam Saleem
Tayyaba Gul Niazi
Zarqa Zareen
MBA III
6th February 2013
Company Introduction .......................................................................................................... 2

National Foods .................................................................................................................. 2
Founder's Philosophy .................................................................................................... 3
Vision And Mission:........................................................................................................ 4
Organizational Chart: .................................................................................................... 5
Financial Statements 2007-2012 ............................................................................................ 6
Dividend Distribution Policy Of National Foods ................................................................... 11
Company Financial statements Analysis .............................................................................. 11
Financial Ratio Analysis And their Comparison To The Industry ...................................... 12
Graphical Comparison Between Industry And National Foods: ................................... 14
Trend Analysis (2007 2012) ........................................................................................... 15
Horizontal analysis: ......................................................................................................16
Vertical analysis: ...........................................................................................................19
New Product Line................................................................................................................ 24
Nationals -- Canned Fruits............................................................................................... 24
Financial Forecast............................................................................................................ 25
Assumptions Underlying The Forecasting: ................................................................. 25
Project feasibility ............................................................................................................. 38
Incremental Cash Flows: ............................................................................................. 38
Net Present Value of The New Product:...................................................................... 40
Payback period: ........................................................................................................... 40
Conclusion ............................................................................................................................ 41
National Foods began its journey in 1970 as a Spice company, with a revolutionary
product that popularized the concept of having clean and healthy food. National foods
initiatives were, to make food that is hygienic, reduce time spent in the kitchen by
women, foster health and contribute towards personal attractiveness, so that people
who use National Foods products would be able to experience a more rewarding lifestyle.
This was long before the phrase 'Corporate Mission' had even been invented.
However, the founder's philosophy remained unchanged over time. Even if their
language, and the notion of only women doing the housework, have become outdated, in
this age of rapidly changing lifestyles, fuelled by the rampant development of technology;
consumers are compelled to alter their eating habits. National Foods responds to this
challenge of developing innovative food products based on convenience and quick
preparation in line with modern lifestyles and yet retains traditional values through its
diverse collection of food products.
In a history that now crosses three decades, National Foods' success has been
influenced by the major events of the day i.e. economic boom, depression, wars,
changing consumer lifestyles and technological advancements. Even after three decades
the company's focal point still remains on customer's needs through product
development in line with the changing market trends.
National Foods must focus on customer's needs and serve them with quality
products at affordable prices at their doorsteps.
Our products must be pure and conform to international standards.
Our research must continuously produce new adventurous products scientifically
tested, hygienically produced in safe and attractive packaging.
We must create environment in our offices and factories where talents are groomed
and have opportunity to advance in their careers.
We must prove to be recognized as good corporate citizens, support good causescharity and bear fair share of taxes.
Reserves must be built, new factories created, sound profits made and fair dividend
paid to our stock holders through building a reliable brand.
National Foods Ltd. must get itself recognized as leader in Pakistan and abroad.
With the help of almighty God, the company can achieve its targets in years to come.
There is no written policy for the distribution of the dividends among the shareholders.
The board itself decides about the dividend payout ratio at the end of each 3rd quarter.
The ratio varies from year to year as varies the net income of the company. For the FY2012
the dividend was Rs. 6 per share of Rs. 10, for the FY 2011 it was Rs. 2.5 per share of Rs. 10.
The dividend growth over five year is 86.40%. The company is rated among those who
value their shareholders by giving them a share in what they earn. National food ltd. from
its inception has never discouraged the shareholders, if they ever had decreased the POR
it only meant for a better future of the company to retain earning and self-finance its
projects.
Company has always distributed its wealth into the people it works for. The
biggest chunk goes to the Government, then employees and after them shareholders.
2010
2011
11.42%
8.20%
26.90%
50.19%
32.09%
6.11%
51.80%
13.00%
0.10%
0.19%
2012
7.10%
29.90%
58.60%
4.00%
0.40%
To Government
To Society
To Company
To Employees
To Providers of Capital
Current ratio
Quick ratio/acid test

ratio
Debt to sale ratio

(Debtor collection
period)
COGS/Sales ratio
Inventory turnover
Asset turnover
1.23
0.18
5.21
71.49
3.19
1.93
Good because company has
0.97 more assets to support liabilities

0.16
Good because company has

more quick assets to support
Liabilities
2.02
poor because company is less

efficient and taking time in
collecting its debt
72.61
Good as less cost is incurred to

generate sales as compared to
industry
6.89
Good because stock is being

efficiently and quickly used to
generate sales quickly
2.03
Good as less sales are being

used to generate more sales as
compare to industry
At edge because company has
just 0.1 less equity to support
debt
Debt/equity ratio
2.09
2.10
Net profit margin
6.55%
10.98%
Poor because of quite less profit

is generated by company
Return on asset
10
Return on equity
11
Financial expense to
sales
12
Return on capital
employed
13
Dividend cover ratio
14
Interest coverage
ratio
15
Operating cash flow

to debt ratio
16
Earnings per share
17
Breakup
Value(Rs/share)(ord.
shares)
18
Fixed assets turnover
13.09%
43.46%
2.28
25.30%
Poor because less return is

generated from assets as
compare to industry
75.75%
Poor as company is generating

less profit with the money
shareholders have invested.
1.30
35.75%
50.00%
2.29
1.53
5.08%
11.05%
0.22%
0.27%
5.72
54.09
22.27
106.49
7.00
Poor because company is

incurring more financial
expenses against sales
getting less return generated
from capital as compare to
company
Good as company's earnings
over the dividend paid to
shareholders is more than
industry
Poor because less secure the
lender is in respect of periodical
interest.
Poor because Company is less
able to cover total debt with its
yearly cash flow from
operations
allocating less profit to each
outstanding share of common
stock
Poor because the market value
of all the individual parts of a
company is less, if the company
was to be broken up and the
individual parts operated
independently.
Poor because fixed assets of

3.94 company are turned to generate
sales than industry.
*Due to the unavailability of the industry data pertaining to the year 2012, we have used
2011s information for the above comparison.
Debt Management
Profitabilty Analysis
12.00
80.00%
10.00
60.00%
8.00
40.00%
6.00
20.00%
4.00
0.00%
2.00
0.00
Debt
ratio
TIE
Debt
Equity
Ratio
National Foods
National Foods
Industry
Industry
Liquidity Analysis
Asset Management
7.00
1.4
6.00
1.2
5.00
4.00
0.8
3.00
0.6
2.00
0.4
1.00
0.00
0.2
0
National Foods
Current ratio
Quick
ratio/acid
test ratio
National Foods
Industry
Industry
The NFL is not able to cope up the industrial benchmark of TIE that can probe the
creditors about their financial charges, however NFLs debt ratio is equal to that of the
industry which means that it is keeping assets as much as the industry requires in relation
to the liabilities. Debt equity ratio for NFL equals to that of the industry, the capital
structure NFL that NFL is following prevails in the whole industry.
The returns of the industry on equity, assets, and the capital employed is quite
high as that of the NFL, that shows that the company is not utilizing its resources very
well as they are equal to that of the industry as seen in debt ratio, and debt to equity
ratio, but still company is unable to generate profit as the industry is generating.
The company is far more liquid than the industry, but when seen closely through
quick ratio we find that this vast difference in liquidity is due to the inventory that the
company is keeping with it. The NFL has high levels of inventory that is not favorable as it
increases the need for financing that is not justifiable in this case.
The company is utilizing its assets to the optimal level as the turnover on fixed
asset is higher than that of the industry, but due to high inventory levels the company is
unable to increase the turnover on inventory. If we see the total asset turnover of the
industry and the company they are with much less difference, as high inventory level was
taking the company down and high turnover on the fixed asset was taking it up, when we
see inventory and fixed assets collectively in the form of the total assets the company
come near to the industry but it could have been better if the stock keeping would have
been low in the company.
Sales
29.85
22.96
19.45
22.76
28.06
29.38
Cost of goods sold
22.55
24.79
20.17
26.78
31.98
23.28
Gross profit
48.16
18.61
17.75
14.30
20.54
43.01
Admin cost
13.33
9.76
9.33
15.38
42.86
24.66
Distribution cost
33.97
-2.64
36.64
16.84
10.89
40.82
Operating expenses
130.30
94.12
-15.00
11.11
-5.26
111.11
Financial charges
-43.65
27.27
13.79
55.36
69.70
32.00
Other income
258.33
-47.83
35.29
-22.73
-26.67
328.57
Profit before tax
131.86
125.63
-27.60
-5.56
22.51
78.50
93.13
79.45
-9.88
5.19
24.19
72.22
153.91
164.37
-37.86
-10.83
21.71
81.69
Taxation
Profit after tax
Sales
From 2007 to 2010 the sales growth has increased on a decreasing trend but from 2011 it is
showing increasing trend which is strong sign for the companys development. On an
average companys sales growth rate is 25.41% which is strong and consistent growth rate
but to grow upward and ahead from 2012 growth rate of 29.85%, it has to increase sales.
Cost of Goods sold:
CGS of the company is fluctuating over time showing increasing and decreasing trend on
an average of 24.925% of six years so, the company needs to cut down cost of goods sold.
Gross profit:
Gross profit is also fluctuating but in 2012 it shows drastic increase in Gross Profit of
48.16%. On an average growth rate is 27.06% of six years. But its need to be increase by
increasing sales and decreasing cost of goods sold.
Operating expenses:
Administration, distribution and other operating expenses has been increased over time
and fluctuating a lot which is a risk for the company in future.
Finance charges:
Finance charges are fluctuating inconsistently over six years but in 2012 it decreased at
(43.65%) which is a good and positive point of company.
Net profit:
Net earnings of National foods on an average of six years are 74.785% which is not
compatible to 2012 earning that is 153.91. Even though, due to drastic increase of Net
profit in 2012, future trends are positive.
ASSETS
Fixed Assets
other Noncurrent
Assets
Current Assets
Total current Assets
Total Assets
LIABILITIES & EQUITY
Issued subscribed & paid
up capital
21.46
-4.51
26.15
1.88
28.63
34.05
45
-20
25
33.33
50
6.53
11.79
56.69
6.79
60.14
15.77
10.69
6.73
45.72
5.04
46.93
22.83
28.32
38.68
6.67
11.5 26.87
24.06
25.08
501.82
27.91
Retained earnings
94.49
54.88
1.23
-29.72
41.85
59.31
Share capital And

Reserves
52.06
24.26
13.28
26.94
40.22
48.99
Long Term Obligations
-57.87
139.62
-24.29
-28.93
1.55
-5.83
Current Liabilities and

provisions
-1.67
-8.11
75.58
0.58
64.91
21.75
28.32
38.68
6.67
11.5 26.87
24.06
Total Shareholder's equity

& liabilities
Current assets:
On an average of six years current assets growth is 26.285% but with high fluctuations. In
2012, 6.53% is depicting low current assets which are a risk for a company. Company is not
so liquid which will affect future.
Fixed Assets:
Fixed assets has been increased in 2012 to meet the increase in sales in 2012, this cost is
not in favor of company due to cost incurred.
Current Liabilities:
Liabilities are showing negative growth rate means it has overcome its current liabilities
which is strength of a company.
Equity and long term liabilities:
National foods have overcome its liabilities and have a balanced trend of equity which is a
positive sign for the company with future prospect.
100
100
100
100
100
100
Cost of goods sold
67.47
71.49
70.45
70.02
67.80
65.79
Gross profit
32.53
28.51
29.55
29.98
32.20
34.21
Admin cost
2.85
3.26
3.65
3.99
4.25
3.81
16.56
16.05
20.27
17.72
18.61
21.50
Operating expenses
1,06
0.6
0.38
0.53
0.59
0.79
Financial charges
0.99
2.28
2.20
2.31
1.83
1.38
Other income
0.60
0.22
0.51
0.45
0.72
1.26
11.68
6.54
3.56
5.88
7.64
7.99
Taxation
3.53
2.37
1.63
2.15
2.51
2.59
Profit after tax
8.15
4.17
1.93
3.72
5.13
5.40
Sales
Distribution cost
Profit before tax
Vertical Analysis (% of Sales)

2007
2008
2009
2010
2011
2012
0
50
100
150
Cost of goods sold
Gross profit
Admin cost
Distribution cost
Operating expenses
Financial charges
Other income
Profit before tax
Taxation
Profit after tax
By looking at the vertical analysis it can be said with evidence that
The company has succeeded in lowering its cost of goods sold as it is now making up a
lesser portion of sales as compared o before.
Gross profit on the other hand is increasing as Cogs has decreased. Other incomes and
other operating expenses are becoming a negligible part of sales.
As income is increasing due to increase in sales; profit to sales ratio is also fattening
which is a good sign for the company.
Whereas indirect expenses, in the form of distribution cost, are taking out a big chunk
of sales.
ASSETS
Fixed Assets
30.3%
27.6%
30.8%
34.3%
36.5%
41.8%
Current Assets
69.7%
72.4%
69.2%
61.7%
63.2%
58.0%
Total Assets
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Issued subscribed & paid up capital
13.1%
14.5%
15.5%
17.3%
3.2%
3.6%
Retained earnings
31.3%
17.8%
12.2%
16.9%
26.4%
27.4%
Share capital And Reserves
44.4%
32.3%
27.7%
34.3%
29.5%
31.0%
3.4%
8.9%
3.9%
7.3%
11.3%
16.3%
Current Liabilities and provisions
52.2%
58.8%
68.3%
58.4%
59.2%
52.7%
Total Shareholder's equity &

liabilities
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
LIABILITIES & EQUITY
Long Term Obligations
From the analysis it is evident that the company is relying on short term financing
to meet the increase in the assets and has issued new stocks to meet the financing needs
too, whereas on the asset side the current assets have started to become a large part.
The current liabilities are making up most of what liabilities are as the %of noncurrent liabilities have started to shrink, and as of current liabilities is expanding which
also implies that is company is riskier as It is meeting its finance need through low-cost
debt.
To sum up the analysis, it can be said that the company has expanded over the
years by increasing its sales and capital structure to meet the growth is being built by
retaining more earnings and creating short term liabilities and restraining from long term
obligations. On the other hand the assets comprise of stable noncurrent assets and
increasing current assets that is stock and cash/bank to meet the unexpected
requirements.
Balance sheet Analysis

Equity & Liabilities
2012
2011
2010
2009
2008
2007
-
1,000,000
2008
515,925
2,000,000
2009
655,386
3,000,000
Equities
2007
367,880
2010
741,945
2011
922,811
2012
1,402,480
Non Current Liabilities
158,406
126,262
140,479
105,588
253,652
107,361
Current Liabilities & Provisions
662,172
1,104,468
1,039,476
1,826,827
1,678,278
1,649,928
Balance sheet Analysis

Assets
2012
2011
2010
2009
2008
2007
1,000,000
2,000,000
3,000,000
Non-current Assets
2007
496,223
2008
637,519
2009
654,835
2010
824,968
2011
787,694
2012
957,342
Current Assets
692,235
1,109,136
1,180,506
1,849,392
2,067,047
2,202,427
National foods ltd has provided a wide variety in products, from savory to
sweetness, everything that has a call for. While looking into the market we have come
across the demand for canned fruits, but to meet this demand there is no significant
supply, and nationals competitors are overlooking this too.
Hence to cater for this market we have come up with the idea of launching a new
product line under the name of Fresh chunkX. For which financial forecasting has been
done while taking into consideration some assumptions based on scenarios prevailing in
Pakistan.
As last years sales growth rate is a stable indicator of the growth of the company
and also its Balance sheet also shows that the company is not taking in any kind of long
term loan and is not using the line of the long term credit. By taking this into account it is
proposed that this new product must be launched by using the credit if the company has
no internal capability. To look into this projects prospect we must;
Forecast the sales and financial statements for the next 3 years i.e. 2013-2015.
Determine the additional funds required.
Following assumptions lay foundations for the forecasting done in case of our new
product.
The forecasted statements show the position of the company at the end of the
each year.
New product is proposed to increase the overall sales of the company by 2.5% for 5
years, i.e. 29.85% in 2012.
The POR will remain the same i.e. 17.76%.
The firm is operating at full capacity hence to launch the new product additional
financing is to be done.
Assets to sales ratios, operating ratios, debt management ratios will remain the
same.
Profit margin for the year 2012 is 8.14%
The need of additional funds is to be determined for the next three years; 20132015.
If Additional funds are required then they shall be taken in the form of notes
payables at the end of the financial year i.e. 2013. @5% of interest rate.
Other items on Balance sheet as well as on the income statement that are not
affected by sales will remain the same.
National Foods Ltd.

Performa Balance Sheet 2013
(in thousands)(Rs.)
Noncurrent Assets
Capital WIP
Operating Assets
Intangibles
Long-term deposits
Total Noncurrent Assets (A)
58,341
Carried Forward
58,341
2012 x Factor
1,176,216
4,473
Carried Forward
4,473
5,812
Carried Forward
5,812
888,716
0.12397
957,342
1,244,842
Current Assets
stores, spare parts and loose tools
Stock in trade
Trade Debts
Advances
Trade Deposits and prepayments
Other receivables
Investments
Cash and bank balances
Total current Assets (B)
Total Assets (A+B)
3,936
0.00055
2012 x Factor
5,209
1,557,538
0.21727
2012 x Factor
2,061,402
288,994
0.04031
2012 x Factor
382,484
25,060
0.0035
2012 x Factor
33,167
19,217
0.00268
2012 x Factor
25,434
3,493
Carried Forward
3,493
260,132
Carried Forward
260,132
2012 x Factor
58,309
44,057
0.00615
2,202,427
2,829,629
3,159,769
4,074,471

Un-appropriated Profit( retained earnings)
Total Shareholder's equity (A)
414,427
Carried Forward
414,427
988,053
Old + Additions to RE
1,591,955
1,402,480
2,006,382
Noncurrent Liabilities
Long term financing (line of credit)
Deferred tax
Retirement benefits obligations
Total Noncurrent Liabilities (B1)
103,248
Carried Forward
103,248
4,113
Carried Forward
4,113
107,361
107,361
Current Liabilities
other payables
134,485
Carried Forward
134,485
creditors
241,691
0.03372
2012 x Factor
319,878
Accrued liabilities
571,327
0.0797
2012 x Factor
756,151
Advances from customers
65,153
0.00909
2012 x Factor
86,230
Accrued interest/markup
11,991
Carried Forward
11,991
AFN
161,197
Short term borrowings
508,301
Carried Forward
508,301
Taxation-Provision less payments
55,306
Carried Forward
55,306
Due to the government
61,674
Carried Forward
61,674
Total current liabilities (B2)
1,649,928
1,960,728
Total liabilities (B) i.e. (B1+B2)
1,757,289
2,068,089
3,159,769
4,074,471
notes payables
Total Shareholder's equity & liabilities (A+B)
National Foods Ltd.

Performa Income Statement 2013
Sales
Cost of goods sold
(in thousands)(Rs.)
7,168,603
0.3235
2012 x (1+ Factor)
9,487,646
(4,837,315)
0.6748
Projected Sales x Factor
(6,402,186)
Gross profit
2,331,288
Admin cost
(203,608)
0.0284
(269,475)
(1,173,226)
0.1637
(1,552,765)
depreciation
(13,924)
0.0157
FA x Factor
(18,428)
other Operating expenses
(76,031)
0.0106
(100,627)
Financial charges
(71,042)
Carried Forward
(71,042)
operating income
42,792
56,635
Profit before tax
836,249
Distribution cost
Taxation
Profit after tax
dividends
Addition to Retained earnings
3,085,460
0.0060
1,129,758
(252,973)
0.3500
583,276
0.0814
(103,607)
0.1776
479,669
Profit Before Tax x Factor
(395,415)
734,342
Profit After Tax x Factor
(130,441)
603,902
National Foods Ltd.

(in thousands)(Rs.)
Noncurrent Assets
Capital WIP
Operating Assets
Intangibles
Long-term deposits
58,341
Carried Forward
58,341
2013 x Factor
1,586,127
4,473
Carried Forward
4,473
5,812
Carried Forward
5,812
1,176,216
0.1240
1,244,842
1,596,412
Current Assets
Stock in trade
Trade Debts
Advances
Other receivables
Investments
Total Assets (A+B)
5,209
0.00055
2013 x Factor
7,025
2,061,402
0.21727
2013 x Factor
2,779,800
382,484
0.04031
2013 x Factor
515,779
33,167
0.00350
2013 x Factor
44,726
25,434
0.00268
2013 x Factor
34,297
3,493
Carried Forward
3,493
260,132
Carried Forward
260,132
2013 x Factor
78,630
58,309
0.00615
2,829,629
3,723,882
4,074,471
5,320,294

414,427
Carried Forward
414,427
1,591,955
2,415,243
2,006,382
2,829,670
Deferred tax
103,248
Carried Forward
103,248
4,113
Carried Forward
4,113
107,361
107,361
Current Liabilities
other payables
134,485
Carried Forward
134,485
creditors
319,878
0.03372
2013 x Factor
431,356
Accrued liabilities
756,151
0.07970
2013 x Factor
1,019,670
86,230
0.00909
2013 x Factor
116,281
11,991
Carried Forward
11,991
notes payables
161,197
AFN
44,199
508,301
Carried Forward
508,301
55,306
Carried Forward
55,306
61,674
Carried Forward
61,674
1,960,728
2,383,263
2,068,089
2,490,624
4,074,471
5,320,293
National Foods Ltd.

Sales
Cost of goods sold
(in thousands)(Rs.)
9,487,646
0.3485
2013 x (1+ Factor)
12,794,091
(6,402,186)
0.6748
(8,633,348)
Gross profit
3,085,460
Admin cost
(269,475)
0.0284
(363,387)
(1,552,765)
0.1637
(2,093,903)
depreciation
(18,428)
0.0157
FA x Factor
(24,851)
(100,627)
0.0106
(135,696)
Financial charges
(71,042)
2012+(AFN2013@5%)
(79,102)
operating income
56,635
Profit before tax
1,129,758
Taxation
(395,415)
0.3500
734,342
0.0774
(130,441)
0.1776
Distribution cost
Profit after tax

dividends
603,902
4,160,742
0.0060
76,373
1,540,176
(539,062)
1,001,115
(177,827)
823,288
National Foods Ltd.

(in thousands)(Rs.)
Noncurrent Assets
Capital WIP
Operating Assets
Intangibles
Long-term deposits
58,341
Carried Forward
58,341
2014 x Factor
2,178,545
4,473
Carried Forward
4,473
5,812
Carried Forward
5,812
1,586,127
0.1240
1,596,412
2,247,171
Current Assets
Stock in trade
Trade Debts
Advances
Other receivables
Investments
Total Assets (A+B)
7,025
0.00055
2014 x Factor
9,648
2,779,800
0.21727
2014 x Factor
3,818,055
515,779
0.04031
2014 x Factor
708,423
44,726
0.00350
2014 x Factor
61,431
34,297
0.00268
2014 x Factor
47,107
3,493
Carried Forward
3,493
260,132
Carried Forward
260,132
2014 x Factor
107,999
78,630
0.00615
3,723,882
5,016,288
5,320,294
7,263,459

414,427
Carried Forward
414,427
2,415,243
3,564,948
2,829,670
3,979,375
Deferred tax
103,248
Carried Forward
103,248
4,113
Carried Forward
4,113
107,361
107,361
Current Liabilities
other payables
134,485
Carried Forward
134,485
creditors
431,356
0.03372
2014 x Factor
592,467
1,019,670
0.07970
2014 x Factor
1,400,517
116,281
0.00909
2014 x Factor
159,712
11,991
Carried Forward
11,991
notes payables
44,199
AFN
252,270
508,301
Carried Forward
508,301
55,306
Carried Forward
55,306
61,674
Carried Forward
61,674
2,383,263
3,176,723
2,490,624
3,284,084
5,320,293
7,263,459
Accrued liabilities
National Foods Ltd.

(in thousands)(Rs.)
Sales
12,794,091
0.3735
2014 x (1+ Factor)
17,572,684
Cost of goods sold
(8,633,348)
0.6748
(11,857,904)
Gross profit
4,160,742
Admin cost
(363,387)
0.0284
(499,112)
(2,093,903)
0.1637
(2,875,976)
depreciation
(24,851)
0.0157
FA x Factor
(34,132)
(135,696)
0.0106
(186,378)
Financial charges
(79,102)
2012+(AFN2014@5%)
(73,252)
operating income
76,373
104,898
Profit before tax
1,540,176
Taxation
(539,062)
0.3500
Profit after tax
1,001,115
0.0782
dividends
(177,827)
0.1776
Distribution cost
823,288
5,714,780
0.0060
2,150,827
(752,789)
1,398,037
(248,332)
1,149,705
Balance Sheet- Liabilities & Equity

2012-15
2015
2014
2013
2012
0
2,000,000
2012
1649928
Current Liabilities
Non-current liabilities
Equity
4,000,000
2013
1960728.319
6,000,000
2014
2383262.691
8,000,000
2015
3176722.74
107361
107361
107361
107361
1402480
2006381.947
2829669.645
3979375.083
Balance Sheet- Assets

2012-15
2015
2014
2013
2012
-
Non-current assets
Current Assets
2,000,000
4,000,000
6,000,000
2012
957,342
2013
1,244,842
2014
1,596,412
8,000,000
2015
2,247,171
2,202,427
2,829,629
3,723,882
5,016,288
The above given charts illustrate the changes in the balance sheet over the period
of time from 2012-15 that is forecasted by taking into consideration the assumptions
described before. Assets are increasing gradually and proportionately with the projected
sales.
At the liability side the increase in the current assets and fixed assets is financed by
accruals and trade credit. And financial analysis also shows that the company is not taking
any kind of long term debt and is planning to maintain that policy. To meet the additional
requirement of funds notes payables are taken up at the end of each year @5% p.a.
Key Performance Indicators

EBIT
profit before
tax - interest
907,291
1,200,800
1,619,278
2,224,079
Improving
NOPAT
EBIT(1-T)
589,739
780,520
1,052,531
1,445,651
Improving
NOWC
(CA-A/P+Acc.)
1,060,631 1,403,745
1,892,950
2,599,967
Improving
Total OP.
Capital
NOWC +Net
Fixed Assets
1,949,347 2,579,961
3,479,077
4,778,512
Improving
Change in TOC
Current Previous TOC
630,614
899,116
1,299,435
Improving
FCF
NOPAT- D in
TOC
NOPAT/TOC x
100
149,906
153,415
146,216
Positive
30.25%
30.25%
30.25%
30.25%
constant
ROIC
AFN
161,197
44,199
252,270
Increasing
POR
Dividends/N.I
x100
17.76%
17.76%
17.76%
17.76%
constant
DPS
Dividend/No. of
Shares
0.002500
0.003147
0.004291
0.005992
Improving
NI/Sales
8.14%
7.74%
7.82%
7.96%
Improving
All the key performance indicators are showing satisfactory results which means that the new product is going to
be successful in terms of ROIC, M and NOPAT. The additional fund requirement is increasing as every years
growth in sales is increasing, and the change in TOC is increasing at an increasing rate because of the increase in
sales at an increasing rate.
Profit Margin
2012-15
8.200%
8.137%
8.100%
8.000%
7.993%
7.900%
2012
7.885%
2013
7.800%
2014
7.749%
2015
7.700%
7.600%
7.500%
Profit Margin
2012
2013
2014
2015
8.137%
7.749%
7.885%
7.993%
This graph shows the fluctuations in the profit margin for the year 2012 and for the
projected years 2013-15. The profit margin is 8.14% in the year 2012 and but the projections
show a decline in the year 2013 that is going to recover in the next years. The decline is
mainly because of the reason that we are not taking into account the increase in sales for
the existing products rather have confined the increase to the new product, and have
considered the g for the existing products as constant at 29.8%.
For the estimation of the new products cash flow the following input data is used:
The sales growth g= 2.5%

For the new product cash outflow is estimated to be Rs. 1000,000.
The companys WACC is 10%.
The cash flow estimation is to be done for three years i.e. 2013-15.
The tax rate is 35%.
Depreciation expense is taken from the forecasted statements.
The national foods uses just in time inventory system which eliminates the need
for working capital employment.
Cash flows of the new product will be equal to, cash flows of each year forecasted
less the cash flows of year 2012 that is without the product.
The project feasibility will be determined by its NPV.
2013
2014
2015
9,487,646
12,794,091
17,572,684
(6,402,186)
(8,633,348)
(11,857,904)
Gross Profit
3,085,460
4,160,742
5,714,780
Admin Cost
(269,475)
(363,387)
(499,112)
(1,552,765)
(2,093,903)
(2,875,976)
Depreciation
(18,428)
(24,851)
(34,132)
Other Operating Expenses
(100,627)
(135,696)
(186,378)
Financial Charges
(71,042)
(79,102)
(73,252)
Operating Income
56,635
76,373
104,898
Profit Before Tax
1,129,758
1,540,176
2,150,827
Tax
(395,415)
(539,062)
(752,789)
Profit After Tax
734,342
1,001,115
1,398,037
Depreciation
18,428
24,851
34,132
Cash Flows With The Project
752,771
1,025,965
1,432,170
(597,200)
(597,200)
(597,200)
155,571
428,765
834,970
Sales
Cost Of Goods Sold
Distribution Cost
Cash Flows W/O The Project (W-1)

Incremental Cash Flows
(W-1)
2,012
Sales
Cost of goods sold
7,168,603
(4,837,315)
Gross profit
2,331,288
Admin cost
(203,608)
Distribution cost
(1,173,226)
depreciation
(13,924)
(76,031)
Financial charges
(71,042)
operating income
42,792
Profit before tax
836,249
tax
(252,973)
profit after tax
583,276
depreciation
13,924
Net op. CF
597,200
Year
CF
Calculation of PV
PV of CFs @10%
2012
(1,000,000)
(1,000,000)
2013
155,571
155,571/(1+0.1)^1
141,428
2014
428,765
428,765/(1+0.1)^2
354,352
2015
834,970
834,970/(1+0.1)^3
627,325
NET PRESENT VALUE
123,105
As the net present value is positive the proposed product launch is acceptable.
While calculating the NPV we should also calculate the Payback Period of the project.
2012
(1,000,000)
(1,000,000)
2013
155,571
(844,429)
2014
428,765
(415,664)
2015
834,970
419,306
Payback Period = 2 + 415,664/834,970

=2.50 years
The project is going to reimburse the investment in 2.5 years that is quite satisfactory.
By taking into consideration the significant financial theories and practices, the
financial statements of the National Foods Pakistan were analyzed and interpreted for
the FY 2007-2012 in order to make justifiable interpretations about the future of the new
product that will go by the name of Fresh chunkx, for which forecasting was done by
keeping in view that this product is going to increase the sales by 2.5% each year, and the
sales for other products was kept constant to see the impact of the new product in
isolation.
Results of the analysis for the new product showed that it will add diversification
to the portfolio of the company and will be successful to achieve its targets as it will be
providing positive cash inflows that will pay back the initial investment in 2.5years,
Whereas, it will be able to provide shareholders with the dividend constantly at the POR
of 17.76%.
To finance the new product AFN will be met through notes payables @5% for each
year. Meanwhile if the market is certain and grooming, this requirement will be met
through the trade creditors by reducing the amount generated through the notes
payables, as it cannot be said with certainty about the future all the risks are taken into
account.

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Company Introduction .......................................................................................................... 2

Quick ratio/acid test

Debt to sale ratio

Good because company has

0.97 more assets to support liabilities

Good because company has

poor because company is less

Good as less cost is incurred to

Good because stock is being

Good as less sales are being

Net profit margin

Poor because of quite less profit

Dividend cover ratio

Operating cash flow

Earnings per share

Fixed assets turnover

Poor because less return is

Poor as company is generating

Poor because company is

Poor because fixed assets of

Cost of goods sold

Profit before tax

Share capital And

Long Term Obligations

Current Liabilities and

Total Shareholder's equity

Cost of goods sold

Profit after tax

Profit before tax

Vertical Analysis (% of Sales)

Profit before tax

Profit after tax

By looking at the vertical analysis it can be said with evidence that

Issued subscribed & paid up capital

Share capital And Reserves

Current Liabilities and provisions

Total Shareholder's equity &

LIABILITIES & EQUITY

Long Term Obligations

Balance sheet Analysis

Non Current Liabilities

Current Liabilities & Provisions

Balance sheet Analysis

National Foods Ltd.

Share capital And Reserves

Advances from customers

Short term borrowings

Taxation-Provision less payments

Due to the government

Total current liabilities (B2)

Total liabilities (B) i.e. (B1+B2)

Total Shareholder's equity & liabilities (A+B)

National Foods Ltd.

2012 x (1+ Factor)

Projected Sales x Factor

Projected Sales x Factor

Projected Sales x Factor

other Operating expenses

Projected Sales x Factor

Projected Sales x Factor

Profit before tax

Profit Before Tax x Factor

Profit After Tax x Factor

National Foods Ltd.

Share capital And Reserves