Naveed IBF

FEROZSONS LABORATORIES LIMITED
2009
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BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
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BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
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BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
COURSE: - INTRODUCTION TO BUSINESS FINANCE
SECTION: B
COMPANY: FEROZSONS LABORATORIES LIMITED
REPORT ON: FINANCIAL RATIO ANALYSIS
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SUBMMITTED TO: - ASIF
SAEED NAJI
SUBMMITTED BY: NAVEED SHERAZ
STUDENT ID: SP09-MM-0054
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
SUBMMTION DATE: - 10TH

NOVEMBER, 2009
TABLE OF CONTENTS
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BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
DESCRIPTION PAGE
NUMBER
01 Letter of acknowledgement 5
02 Company profile 6
03 Calculation of ratios 8
04 Cross sectional analysis table 12
05 Graphical presentation on cross 18

sectional analysis
06 Time series analysis 28
07 Graphical presentation on time series 39

analysis
08 Common size balance sheet 50
09 Common size income statement 54
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10 Internal growth rate 55
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11 Sustainable growth rate 56
12 Pro forma balance sheet 57
13 Pro forma income statement 60
14 Plug variable 61
15 Recommendations 62
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
LETTER OF
ACKNOWLEDGEMENT
November 10, 2009
Firstly we would like to thank ALLAH (almighty) for giving us the opportunity
and recourses to be able to do something productive with our lives. Without his
blessings we would not have been able to come as far as we have.
Then our sincere thanks to Sir Asif Saeed Naji of (Introduction to Business
Finance) for helping us throughout this report. The report helped us find new ways
of being innovative and creative. This report would not have been possible without
his motivation & cooperation and continuous direction.
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Last but not the least we would like to thank our families for their incessant
support and approval. 7
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
COMPANY’S PROFILE
In 1894, Maulvi Ferozuddin Khan established the business House of Ferozsons through the
creation of a publishing House - Ferozsons Limited. From the beginning, Ferozuddin Khan's
vision of business extended beyond wealth creation, and firmly incorporated the enrichment of
human life in the under-developed South Asian region.
Thus the publishing house was created not only as a means of creating wealth, but as one of
spreading literacy and education among the masses of the sub-continent.
In the same spirit, Ferozsons Laboratories Limited was created in 1956 as one of the first
pharmaceutical manufacturing facilities in the fledgling state of Pakistan, to ensure a constant
and reliable source of quality medicines for the people of the nation as experienced its birth
pangs.
The Company possesses strong brands in cardiology, gastroenterology, oncology and
dermatology. We also have a long history of contract manufacture for Multinational
Corporations, and a successful track record of in-licensing of products. Among other principals,
Ferozsons currently represents the Boston Scientific Corporation, USA, for its range of
interventional products and devices in the Pakistan market.
Though now an independent entity and a public limited company listed on the country's three
stock exchanges, the founder's spirit still courses through the company's veins.
BOARD OF
DIRECTORS
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MRS. AKHTAR KHALID CHAIRPERSON &CHIEF EXECUTIVE DIRECTOR
WAHEED EXECUTIVE 8
MR. OSMAN KHALID PRESIDENT EXECUTIVE DIRECTOR
WAHEED
MR. OMAR KHALID GENERAL MANAGER EXECUTIVE DIRECTOR

WAHEED
MRS. MUNIZE AZHAR NON-EXECUTIVE

DIRECTOR
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
MR. FAROOQ MAZHAR NON-EXECUTIVE

DIRECTOR
MR. NIHAL CASSIM NON-EXECUTIVE

DIRECTOR
MR. M.M. ISPAHANI NON-EXECUTIVE

DIRECTOR
MR. DOST M. KHAN NON-EXECUTIVE

SHERPAO DIRECTOR
MR. M. KHALIL MAIN NON-EXECUTIVE

DIRECTOR
Mission
Statement
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We aim to improve the Quality of Life 9
through the ethical promotion and sales of
world class medicines at locally relevant prices.
In doing so we will:
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
Strive to provide best-in-industry
returns to our shareholders.
Be the Second to None in Employee Training,
Reward and Motivation.
Maintain the Highest Levels of Ethics
while focusing on building our portfolio
of Prescription Brands.
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CALCULATION
AND
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
INTERPRETATION
ON CROSS
SECTIONAL
ANALYSIS
CALCULATION OF RATIOS
S.N RATIOS FORMULA 2006 2007 2008 Page

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O
1. CURRENT RATIO Current assets__ 317,048, 442,376,9 509,539,1

714 88 06
Current liabilities 110,712, 154,258,2 196,169,6

695 34 63
2.86 2.86 2.59
2. QUICK RATIO Quick assets___ 111,562, 260,587,9 254,736,2
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
545 11 26

695 34 63
1.00 1.68 1.29
3. CASH RATIO Cash_______ 12,301,8 41,680,94 35,807,46

64 0 1

695 34 63
0.11 0.27 0.18
4. WORKING CAPITAL Current assets - 317,048, 442,376,9 509,539,1

Current 714 88 06
liabilities - - -
110,712, 154,258,2 196,169,6
695 34 63
206,336 288,118, 313,369,

,019 754 443
5. DEBT RATIO Total 162,944, 278,772,4 403,380,2

liabilities/Debts 468 74_ 32_
Total assets 942,466, 1,218,361 1,481,628

081 ,366 ,536
0.17
0.22 0.27
6. DEBT TO EQUITY Total 162,944, 278,772,4 403,380,2

RATIO liabilities/Debs 468 74 32
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Total S.H.E 517,083, 682,604,6 826,236,8
613 07 91
12
0.31 0.40 0.48
7. TIME INTEREST Operating 318,137, 258,513,1 294,149,4

EARNED profit/EBIT 394 12 61
Interest expense 2,268,56 1,663,208 1,487,228

0
156.43 197.78
97.15
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
8. A/R TURNOVER Net credit sales 752,221, 922,368,5 932,297,9

631 42 94
Average A/R
12,611,9 22,274,32 28,195,98
31 2 7
59.64 41.40 33.06

times times times
9. AVG.COLLECTION 360____ 360_ 360_ 360_

PERIOD
A/R turnover 59.64 41.40 33.06
6 days 9 days 10.88

days
10. INVENTORY COGS_________ 322,838, 415,507,4 391,559,4

TURNOVER 328 67 32
Avg. inventory
145,341, 139,578,6 157,301,9
209 99 87
2.22 2.97 2.48

times times times
11. FIXED ASSETS Net sales__ 752,221, 922,368,5 932,297,9

TURNOVER 631 42 94
Fixed assets
625,417, 775,984,3 972,089,4
367 78 30
1.20 1.18 0.95

times times times
12. TOTAL ASSETS Net sales_ 752,221, 922,368,5 932,297,9

TURNOVER 631 42 94
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Total assets
942,466, 1,218,361 1,481,628 13
081 ,366 ,536
0.79 0.75 0.62

times times times
13. GROSS PROFIT Gross profit 429,383, 506,861,0 540,738,5

MARGIN 303 75 62
Net sales
752,221, 922,368,5 932,297,9
631
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
0.57*100 42 94
57% 0.54*10 0.58*100

0
54% 58%
S.N RATIOS FORMULA 2006 2007 2008

O
14. OPERATING Operating profit 220,405, 360,176,3 294,149,4

PROFIT MARGIN 954 20 61
Net sales
752,221, 922,368,5 932,297,9
631 42 94
0.29*100 0.28*100 0.31*100
29% 28% 31%
15. NET PROFIT Net profit 175,868, 200,254,1 217,023,8

MARGIN 715 60 29
Net sales 752,221, 922,368,5 932,297,9

631 42 94
0.23*100 0.21*100 0.23*100
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23% 21% 23%
16. RETURN ON Net profit 175,868, 200,254,1 217,023,8 14

ASSETS 715 60 29
Total assets 942,466, 1,218,361 1,481,628

081 ,366 ,536
0.19*100 0.16*100 0.15*100
19% 16% 15%
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
17. RETURN ON Net profit 175,868, 200,254,1 217,023,8

EQUITY 715 60 29
T.S.H.E
517,083, 682,604,6 826,236,8
613 07 91
0.342*10 0.293*10 0.262*10

0 0 0
34.2% 29.3% 26.2%
CROSS SECTIONAL ANALYSIS (RESULTS) Page

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S.N RATIOS COMPANY’S INDUSTRY’S DECISION
O RESULT RESULT
1. CURRENT RATIO 2.59 1.6 BETTER
2. QUICK RATIO 1.29 1.2 BETTER
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
3. CASH RATIO 0.18 0.8 WORSE
4. WORKING CAPITAL 313,369,443 5,000,000 BETTER
5. DEBT RATIO 0.27 0.45 BETTER
6. DEBT TO EQUITY RATIO 0.48 0.55 BETTER
7. TIME INTEREST EARNED 197.78 TIMES 18 TIMES

BETTER
8. A/R TURNOVER 33.06 TIMES 18 TIMES
9. AVERAGE COLLECTION 10.88 DAYS 20 DAYS BETTER

PERIOD
10. 2.48 TIMES 25 TIMES
INVENTORY TURNOVER
BETTER
11. 0.95 TIMES 10 TIMES
FIXED ASSETS
12. TURNOVER 0.62 TIMES 6 TIMES
WORSE
13. TOTAL ASSETS 58% 25%
TURNOVER
14. 31% 20% WORSE
GROSS PROFIT MARGIN
15. 23% 15%
OPERATING PROFIT
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WORSE
16. MARGIN 15% 10%
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17. NET PROFIT MARGIN 26.2% 12%
BETTER
RETURN ON ASSETS
RETURN ON EQUITY BETTER
BETTER
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
BETTER
BETTER
CROSS SECTIONAL ANALYSIS INTERPRETATION FOR

2008
CURRENT RATIO:
Current ratio measures a firm’s ability to meet its short term obligations. It shows the
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relationship between current assets and current liabilities.
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In this company current ratio is 2.59 times. It means that the company’s current assets are 2.59
times more than that of its current liabilities.
If we compare the results of the company with the results of industry, company’s results are
showing BETTER position, because company’s current ratio is more than that of industry’s
current ratio.
QUICK RATIO:
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
Quick ratio measures a firm’s ability to meet its short term obligations. It shows the relationship
between quick assets and current liabilities.
In this company quick ratio is 1.29 times. It means that the company’s quick assets are 1.29
times more than that of its current liabilities.
showing BETTER position, because company’s quick ratio is more than industry’s quick ratio.
CASH RATIO:
Cash ratio measures a firm’s ability to meet its short term obligations. It shows the relationship
between cash and current liabilities.
In this company cash ratio is 0.18 times. It means that the company’s cash ratio is 0.18 times
more than that of its current liabilities.
showing WORSE position, because company’s cash ratio is less than industry’s cash ratio.
WORKING CAPITAL:
Working capital measures a firm’s ability to meet its short term obligations. It shows the
difference between current assets and current liabilities.
In this company working capital is Rs. 313,369,443. It means that the company’s working capital
is Rs.313,369,443 times more than that of its current liabilities.
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showing BETTER position, because company’s working capital is more than industry’s working 18
capital.
DEBT RATIO:
Debt ratio measures a firm’s ability to meet its long term obligations. It shows the relationship
between total debts and total assets.
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
In this company debt ratio is 0.27 times. It means that the company’s total debts are 0.27 times of
its total assets.
showing BETTER position, because company’s debt ratio is less than that of industry’s debt
ratio.
DEBT TO EQUITY RATIO:

Debt to equity ratio measures a firm’s ability to meet its long term obligations. It shows the
relationship between total debts and total share holder’s equity.
In this company debt to equity ratio is 0.48 times. It means the company’s total liability is 0.48
of its total share holder equity.
showing BETTER position than industry’s results, because company’s debt to equity ratio is less
than that of industry’s debt to equity ratio.
TIME INTEREST EARNED:

Time interest earned indicates that how many times a company can pay its interest expense from
its operating profit.
In this company time interest earned ratio is 197.78 times. It means that a company can pay it
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interest expense 197.78 times from its operating profit.
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If we compare the results of the company with the results of the industry, company’s results are
showing BETTER position, because time interest earned ratio is more than that of industry’s
time interest earned ratio.
ACCOUNT RECEIVABLE TURNOVER:
Account receivable turnover ratio indicates that how many times a company converts its
receivable into cash during a year.
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
In this company account receivable turnover ratio is 33.06 times. It means that a company
converts its receivables into cash 33.06 times during a year.
showing BETTER position because company’s account receivable turnover ratio is more than
that of industry’s account receivable turnover ratio.
AVERAGE COLLECTION PERIOD:
Average collection period indicates that how many days a company converts it’s receivable into
cash during a year.
In this company average collection period is 10.88 days. It means that a company converts its
receivables into cash after every 10.88 days during a year.
showing BETTER position because company’s average collection period is less than that of
industry average collection period.
INVENTORY TURNOVER:
Inventory turnover ratio indicates that how many times a company converts its inventory into
cash or sales during a year.
In this company inventory turnover ratio is 2.48 times. It means that a company converts its
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inventory into cash or sales 2.48 times during a year.
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showing WORSE position because company’s inventory turnover ratio is less than that of
industry inventory turnover ratio.
FIXED ASSETS TURNOVER:

Fixed assets turnover ratio indicates that how many times a company generated revenue from its
fixed assets of its own worth.
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
In this company fixed assets turnover ratio is 0.95 times. It means that a company fixed assets
generate total revenue 0.95 times of its own worth.
showing WORSE position because company’s fixed assets turnover ratio is less than that of an
industry fixed assets turnover ratio.
TOTAL ASSETS TURNOVER:
Total assets turnover ratio indicates that how many times a company generated revenue from its
total assets of its own worth.
In this company total assets turnover ratio is 0.62 times. It means that company total assets
generate total revenue 0.62 times of its own worth.
showing WORSE position because company’s total assets turnover ratio is less than that of an
industry total assets turnover ratio.
GROSS PROFIT MARGIN:

Gross profit margin shows the relationship between gross profit and net sales. It is a percentage
of gross profit based on the value of net sales.
In this company gross profit margin is 0.58 or 58%. It means that a company generates gross
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profit of 0.58 or 58% based on the value of net sales.
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showing BETTER position because company’s gross profit margin is more than that of an
industry gross profit margin.
OPERATING PROFIT MARGIN:
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
Operating profit margin shows the relationship between operating profit and net sales. It is a
percentage of operating profit based on the value of net sales.
In this company operating profit margin is 0.31 or 31%. It means that a company generates
operating profit of 0.31 or 31% based on the value of net sales.
showing BETTER position because company’s operating profit margin is more than that of an
industry operating profit margin.
NET PROFIT MARGIN:
Net profit margin shows the relationship between net profit and net sales. It is a percentage of net
profit based on the value of net sales.
In this company net profit margin is 0.23 or 23%. It means that a company generates net profit of
0.23 or 23% based on the value of net sales.
showing BETTER position because company’s net profit margin is less than that of an industry
net profit margin.
RETURN ON ASSETS:
Return on assets shows the relationship between net profit and total assets. It is a percentage of
net profit based on the value of total assets.
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In this company return on assets is 0.14 or 14%. It means that a company generates net profit of 22
0.14 or 14% based on the value of total assets.
showing BETTER position because company’s return on assets is more than that of an industry
return on assets.
RETURN ON EQUITY:
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
Return on equity shows the relationship between net profit and total shareholders’ equity. It is a
percentage of net profit based on the value of total shareholders’ equity.
In this company return on equity is 0.262 or 26.2%. It means that a company generates net profit
of 0.262 or 26.2% based on the value of total shareholders’ equity.
showing BETTER position because company’s return on equity is more than that of an industry
return on equity.
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BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
GRAPHICAL
PRESENTATION ON
CROSS SECTIONAL
ANALYSIS
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BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
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BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
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BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
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BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
TIME SERIES
ANALYSIS FOR
2008
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BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
SHORT TERM SOLVENCY RATIOS:
CURRENT RATIO:
2006 2007 2008 DECISION
2.86 2.86 2.59 WORSE
INTERPRETATION:
Current ratio measures the firm's ability to meet its short term obligations. It shows the
relationship between current assets and current liabilities.
In year 2006 current ratio was 2.86 times. It means current assets were 2.86 times more than that
of its current liabilities. In year 2007 the current ratio was also 2.86 times, and in 2008 it is
decreased to 2.59 times.
If we evaluate the performance of the firm over the period of time, company’s results are
showing WORSE position because company's current ratio is showing decreasing trend.
QUICK RATIO:
2006 2007 2008 DECISION Page

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1.00 1.68 1.29 BETTER
INTERPRETATION:
Quick ratio measures the firm's ability to meet its short term obligations. It shows the
relationship between quick assets and current liabilities.
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
In year 2006 quick ratio was 1.00 times. It means quick assets were 1.00 times more than that of
its current liabilities. In year 2007 the quick ratio was 1.68 times, and in 2008 it is reached to
1.29 times (the result shows mixed trend).
showing BETTER position because company's current ratio is showing increasing trend.
CASH RATIO:
2006 2007 2008 DECISION
0.11 0.27 0.18 BETTER
INTERPRETATION:
Cash ratio measures the firm's ability to meet its short term obligations. It shows the relationship
between cash and current liabilities.
In year 2006 cash ratio was 0.11 times. It means cash were 0.11times more than that of its
current liabilities. In year 2007 the cash was 0.27 times, and in 2008 it is decreased to 0.18 times.
showing BETTER position because company's current ratio is showing mixed trend (if we
compare it with 2006 the result is showing increasing trend).
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WORKING CAPITAL: 30
2006 2007 2008 DECISION
203,336,019 288,118,754 313,369,443 BETTER
INTERPRETATION:
Working capital measures the firm's ability to meet its short term obligations. It shows the
difference between current assets and current liabilities.
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
In year 2006 working capital was 206,336,019. It means working capital were 206,336,019 times
more than that of its current liabilities. In year 2007 the working capital was also 288,118,754,
and in 2008 it is increased to 313,369,443.
showing BETTER position because company's current ratio is showing increasing trend.
LONG TERM SOLVENCY RATIOS:

DEBT RATIO:
2006 2007 2008 DECISION
0.17 0.22 0.27 WORSE
INTERPRETATION:
Debt ratio measures the firm's ability to meet its long term obligations. It shows the relationship
between total debts and total liabilities.
In year 2006 debt ratio was 0.17 times. It means debts were 0.17 times more than that of its total
assets. In year 2007 the debt ratio was also 0.22 times, and in 2008 it is increased to 0.27 times.
showing WORSE position because company's debt ratio is showing increasing trend.
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DEBT TO EQUITY RATIO:
2006 2007 2008 DECISION
0.31 0.40 0.48 WORSE
INTERPRETATION:
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
Debt to equity ratio measures the firm's ability to meet its long term obligations. It shows the
relationship between total debts and total share holder’s equity.
In year 2006 debt to equity ratio was 0.31 times. It means debts to equity were 0.31 times more
than that of its total share holder’s equity. In year 2007 the debt to equity ratio was also 0.40
times, and in 2008 it is increased to 0.48 times.
showing WORSE position because company's debt ratio is showing increasing trend.
TIME INTEREST EARNED:
2006 2007 2008 DECISION
97.15 156.43 197.78 BETTER
INTERPRETATION:
Time interest earned ratio measures the firm's ability to meet its long term obligations. It shows
the relationship between operating profit and interest expense.
In year 2006 debt to time interest earned ratio was 97.15 times. It means time interest earned
ratio were 97.15 times more than that of its interest expense. In year 2007 the time interest
earned ratio was also 156.43 times, and in 2008 it is increased to 197.78 times.
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showing BETTER position because company's debt ratio is showing increasing trend. 32
ASSETS UTILIZATION RATIOS:

ACCOUNT RECEIVABLE TURNOVER:
2006 2007 2008 DECISION
59.64 times 41.40 times 33.06 times WORSE
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
INTERPRETATION:
Account receivable turnover ratio indicates how efficiently management utilizes its assets in
generating revenue by relating or comparing sales to different types of assets.
In year 2006 account receivable turnover ratio was 59.64 times. It means the firm can convert its
account receivables into cash 59.64 times. In year 2007 the account receivable turnover ratio was
41.40 times, and in 2008 it is decreased to 33.06 times.
showing WORSE position because company's account receivable turnover ratio is showing
decreasing trend.
AVERAGE COLLECTION PERIOD:
2006 2007 2008 DECISION
6 DAYS 9 DAYS 11 DAYS WORSE
INTERPRETATION:
Average collection period indicates how efficiently management utilizes its assets in generating
revenue by relating or comparing sales to different types of assets.
It shows the relationship between days and account receivable turnover.
In year 2006 average collection period was 6 days. It means the firm can collect its account Page
33
receivables within 6 days. In year 2007 the average collection period was 9 days, and in 2008 it
is increased to 11 days.
showing WORSE position because company's account receivable turnover ratio is showing
increasing trend.
INVENORY TURNOVER:
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
2006 2007 2008 DECISION
2.22 times 2.97 times 2.48 times BETTER
INTERPRETATION:
Inventory turnover ratio indicates how many times a company converts its inventory into cash or
sales during a year.
It shows the relationship between costs of goods sold and average inventory.
In year 2006 inventory turnover ratio was 2.22 times. It means the firm can convert its inventory
into cash or sales 2.22 times. In year 2007 the inventory turnover ratio was 2.97 times, and in
2008 it is decreased to 2.48 times.
showing BETTER position because company's inventory turnover ratio is showing increasing
trend.
FIXED ASSETS TURNOVER:
2006 2007 2008 DECISION
INTERPRETATION:
Fixed assets turnover ratio indicates that how many times revenue can be generated by the fixed
assets of its own worth.
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In year 2006 fixed assets turnover ratio was 1.20 times. It means the firm’s fixed assets can 34
generate total revenue 1.20 times. In year 2007 the fixed assets turnover ratio was 1.18 times,
and in 2008 it is decreased to 0.95 times.
showing WORSE position because company's fixed asset turnover ratio is showing decreasing
trend.
TOTAL ASSETS TURNOVER:
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
2006 2007 2008 DECISION
INTERPRETATION:
Total assets turnover ratio indicates that how many times revenue can be generated by the total
assets of its own worth.
In year 2006 total assets turnover ratio was 0.79 times. It means the firm’s total assets can
generate total revenue 0.79 times. In year 2007 the total assets turnover ratio was 0.75 times, and
in 2008 it is decreased to 0.62 times.
showing WORSE position because company's total asset turnover ratio is showing decreasing
trend.
PROFITABILITY RATIO:
GROSS PROFIT MARGIN:
2006 2007 2008 DECISION
57% 54% 58% BETTER
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INTERPRETATION:
Gross profit margin ratio measures the overall record of management in producing profit. It
35
shows the relationship between gross profit and net sales.
In year 2006 gross profit margin ratio was 57%. It means the firm’s generate gross profit of 57%
based on the value of net sales. In year 2007 the gross profit margin ratio was 54%, and in 2008
it is increased to 58%.
showing BETTER position because company's gross profit margin ratio is showing increasing
trend.
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
OPERATING PROFIT MARGIN:
2006 2007 2008 DECISION
29% 28% 31% BETTER
INTERPRETATION:
Operating profit margin ratio measures the overall record of management in producing profit. It
shows the relationship between operating profit and net sales.
In year 2006 operating profit margin ratio was 29%. It means the firm’s generate operating
profit of 29% based on the value of net sales. In year 2007 the operating profit margin ratio was
28%, and in 2008 it is increased to 31%.
showing BETTER position because company's operating profit margin ratio is showing
increasing trend.
NET PROFIT MARGIN:
2006 2007 2008 DECISION
23% 21% 23% BETTER
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INTERPRETATION:
36
NET profit margin ratio measures the overall record of management in producing profit. It shows
the relationship between net profit and net sales.
In year 2006 net profit margin ratio was 23%. It means the firm’s generate net profit of 23%
based on the value of net sales. In year 2007 the net profit margin ratio was 21%, and in 2008 it
is increased to 23%.
showing BETTER position because company's net profit margin ratio is showing
increasing/consistence trend.
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
RETURN ON ASSETS:
2006 2007 2008 DECISION
18.7% 16.43% 14.64% WORSE
INTERPRETATION:
Return on asset ratio measures the overall record of management in producing profit on the value
on total assets. It shows the relationship between net profit and total assets.
In year 2006 return on asset ratio was 18.7%. It means the firm’s generate g profit of 18.7%
based on the value of total assets. In year 2007 the return on asset ratio was 16.43%, and in 2008
it is decreased to 14.64%.
showing WORSE position because company's return on asset ratio is showing decreasing trend.
RETURN ON EQUITY:
2006 2007 2008 DECISION
34.2% 29.3% 26.2% WORSE
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37
INTERPRETATION:
Return on equity ratio measures the overall record of management in producing profit on the
value of total share holder’s equity. It shows the relationship between profit and total share
holder’s equity.
In year 2006 return on equity ratio was 34.2%. It means the firm’s generate profit of 34.2%
based on the value of total share holder’s equity. In year 2007 the return on equity ratio was
29.3%, and in 2008 it is decreased to 26.2%.
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
showing WORSE position because company's return on equity ratio is showing decreasing trend.
EARNING PER SHARE:
2006 2007 2008 DECISION
14.59 16.16 15 WORSE
INTERPRETATION:
Earnings per share are the earning of the company on each share. It shows relationship between
net income and number of shares issued. It is generally more considerable by the shareholders.
In 2006 earnings per share was Rs.14.59. it means that company earns Rs.14.59. And in 2007 it
was increased to Rs.16.16 and in 2008 it has reached to Rs.15.
If we evaluate the performance of the firm over the period of time company’s results are showing
WORSE position because there is an increasing trend in company’s earnings per share.
DIVIDEND PER SHARE:
2006 2007 2008 DECISION
Page
4 3.22 5.22 BETTER 38
INTERPRETATION:
Dividend per share is linked with Earning per Share of the company. As dividend is eventually
shareholder’s profit. It shows relationship between total dividend paid and number of shares
issued.
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
In 2006 dividend per share was Rs.4. it means that company can paid dividend of Rs.4 on per
share. And in 2007 it was decreased to Rs.3.22 and in 2008 it has reached to Rs.5.22.
If we evaluate the performance of the firm over the period of time company’s results are showing
BETTER position because there is an increasing trend in company’s dividend per share.
Page
39
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
GRAPHICAL
PRESENTATION ON TIME
SERIES ANALYSIS
Page
40
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
Page
41
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
Page
42
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
Page
43
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
COMMON SIZE
BALANCE SHEET
AND INCOME
STATEMENT FOR
2007-2008
Page
44
Ferozsons laboratories limited Pakistan
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
Common size balance sheet

As at June 30th, 2007-2008
2007 2008
ASSETS % %
CURRENT ASSETS
Cash and bank balances 3.421 2.416
Loan and advances 0.2801 0.3077
Deposits and payments 0.247 0.392
Other receivables 1.063 0.102
Trade debts 2.621 1.650
Stock in trade 10.983 12.201
Advance income tax 0.276 ---------
Stores and spares 0.3513 0.276
Short term investment 15.345 13.125
Accrued interest 0.2983 0.0859
Current portion of long term loan 1.4209 3.830
TOTAL CURRENT ASSETS 36.30% 34.390%
FIXED ASSETS
Property, plant and equipment 45.190 41.2375
Page
Long term investment 12.279 13.729 45
Long term loan 6.174 10.5331
Long term deposits 0.049 0.0533
Derivative Asset-Interest Rate Swap ------------- 0.055
TOTAL FIXED ASSETS 63.70% 65.609%
TOTAL ASSETS 100% 100%
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
2007 2008
EQUITIES AND LIABILITIES % %
CURRENT LIABILITIES
Trade and other payables 10.7541 7.8577
Accrued markup on long term financing 0.1321 0.3939
Current portion of long term liabilities 1.4209 3.8302
Current portion of liabilities against assets 0.3538 0.1619
Provision for tax - net ---------- 10.1297
TOTAL CURRENT LIABILITIES 12.661% 13.240%
NON CURRENT LIABILITIES
Long term financing - secured 6.171 10.533
Liabilities against assets subject to financing lease 0.0840 0.098
Deferred liability for taxation 3.964 3.353
TOTAL NON CURRENT LIABILITIES 10.218% 13.985%
Page
CAPITAL AND RESERVES
Share capital 9.895 9.764 46

Capital reserves 0.026 0.021
Revenue reserves 46.104 45.979
TOTAL SHARE HOLDER’S EQUITY 56.026% 55.765%
SURPLUS ON ASSETS %22.5 %17.5
TOTAL EQUITIES 100% 100%
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009

Common size income statement
For the year ended June 30th, 2007-2008
2007 2008
Sales 100% 100%
Cost of goods sold (45%) (42%)
Gross profit 55% 58%
Other operating income 2.78% 2.23%
Administrative expenses (5.59%) (6.51%)
Selling and distribution cost (23.48%) (21.39%)
Finance cost (0.18%) (0.15%)
Other charges (1.91%) (2.26%)
Share in profit of Farmacia 98% owned partnership firm 1.22% 1.47%
Profit before taxation 28.02% 31.32%
Page
Provision for taxation (6.31%) (8.11%)
47
Profit after taxation 23.27% 21.71%
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
INTERNAL
GROWTH RATE
AND
SUSTAINABLE Page
48
GROWTH RATE
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
INTERNAL GROWTH RATE
FORMULA: IGR = ROA * b * 100
1- (ROA * b)
ROA = Net Profit / Loss
Total Assets
ROA = 217023829
1481628536
ROA = 14.64% or 0.1464
Page
Dividend payout ratio = dividend paid
Net profit
49
Dividend payout ratio= 75538996
217023829
Dividend payout ratio = 34.80% or 0 .3480
Retention ratio = 1-0.3480
0.6520 Or 65.20%
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
IGR = 0.1464*0.6520 *100
1-(0.1464*0.6520)
INTERNAL GROWTH RATE = 10.55%
SUSTAINABLE GROWTH RATE

FORMULA: SGR = ROE* b * 100
1-(ROE* b)
ROE = Net Profit / Loss
Total S.H.E
ROE = 217023829
826236891
R0E = 26.26% Or 0.2626
Retention Ratio =1- dividend payout ratio
Dividend payout ratio = 75538996 Page

50
217023829
Dividend payout ratio = 34.80% or 0 .3480
Retention ratio = 1-0.3480
0.6520 Or 65.20%
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
Sustainable growth rate = 0.2626*0.6520 *100
1-(0.2626 * 0.6520)
SUSTAINABLE GROWTH RATE = 20.65%
PROFORMA
BALANCE SHEET
AND PROFORMA
INCOME
Page
STATEMENT
51
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009

Pro forma balance sheet
As at June 30th, 2008-2009
2008 2009
ASSETS Increased by
20.65%
CURRENT ASSETS
Cash and bank balances 35,807,461 43,201,701.

7
Loan and advances 4,560,060 5,501,712.3

9
Deposits and payments 5,809,956 7,009,711.9

14
Other receivables 1,530,284 1,846,287.6
Page
4
52
Trade debts 24,454,201 29,503,993.
51
Stock in trade 180,787,784 218,120,461

.4
Advance income tax ------------ ---------
Stores and spares 4,091,300 4,936,153.4

5
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
Short term investment 194,474,564 234,633,561

.5
Accrued interest 1,273,496 1,536,472.9

24
Current portion of long term loan 56,750,000 68,468,875
TOTAL CURRENT ASSETS 509,539,46 614,758,93

1 1.4
FIXED ASSETS
Property, plant and equipment 610,987,413 737,156,313
.8
Long term investment 203,425,956 278,008,915

.9
Long term loan 156,062,500 188,289,406

.3
Long term deposits 790,870 954,184.655
Derivative Asset-Interest Rate Swap 822,691 992,576.70
TOTAL FIXED ASSETS 972,089,43 1,172,825,

0 897
TOTAL ASSETS 1,481,628 1,787,584

,536 ,829
Page
53
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
2008 2009
EQUITIES AND LIABILITIES

CURRENT LIABILITIES
Trade and other payables 116,423,214 140,464,607

.7
Accrued markup on long term financing 5,588,157 6,742,111.4

21
Current portion of long term liabilities 56,750,000 68,468,875
Current portion of liabilities against assets 2,399,815 2,895,376.7

9
Provision for tax – net 15,008,477 18,107,727.

5
TOTAL CURRENT LIABILITIES 196,169, 116,028,6

663 98.4
NON CURRENT LIABILITIES
Long term financing - secured 156,062,500 188289406.

3
Liabilities against assets subject to financing 1,456,643 1757439.78

lease
Deferred liability for taxation 49,691,426 59952705.4
7
TOTAL NON CURRENT LIABILITIES 207,210, 24999955

569 1.5
Page
CAPITAL AND RESERVES
Share capital 144,672,768 174,547,694

54
.6
Capital reserves 321,843 388,303.57
Revenue reserves 681,242,280 821,918,810

.8
TOTAL EQUITIES 1,481,62 1,787,584

8,536 ,829
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009

Pro forma income statement
As at June 30th, 2008-2009
2008 2009
Sales 932,297,9 1,124,817,
94 530
Cost of goods sold (391,559, (472,416,4

432) 54.7)
Gross profit 540,738,5 652,401,07

62 5.3
Page
Other operating income 20,809,63 25,106,094
0 .7
55
Administrative expenses (60,719,2 (73,257,80
76) 6.50)
Selling and distribution cost (199,424, (240,605,8

660) 52.3)
Finance cost (1,487,22 (1,794,340.

8) 58)
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
Other charges (21,073,7 (25,425,53

92) 0.05)
Share in profit of Farmacia 98% owned partnership firm 13,818,99 16,672,619

7 .88
Profit before taxation 292,662,2 353,096,98

33 4.1
Provision for taxation (75,638,4 (91,257,73

04) 4.4)
Profit after taxation 217,023, 261,839,2

829 49.7
Page
56
Plug variable
For the year ended June 30th, 2008-2009
Profit from pro forma statement 261839249
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
Less: addition to retained earnings (170617918)

Possible dividend payment 91223131
RECOMMENDATIONS
1. The cash ratio of the company is showing worse position. To improve the
condition of cash the company should pay less cash dividend and retain
Page
more.
To generate more revenue the company should increase its sales due to 57
increase in the volume of sales the account receivable will automatically
increase.
2. Before paying debts company should issue ordinary shares and bonds
instead of borrowing from financial institutions, it will also help to increase
in cash.
BY NAVEED SHERAZ
IBF SEC-B FALL 2009
2009
3. The condition of inventory is also worst; to improve in inventory the

company should reduce the price to sale more inventory.
4. More fixed assets should be purchased, and also change outdated machines,
which also help to maximize profit.
5. The company should move towards advance technology to reduce its cost,
advance and latest technology will help to generate more revenue, same
time, and also help to minimize the cost of production.
6. Overall performance of the company is better than industry.
Page
58
BY NAVEED SHERAZ
IBF SEC-B FALL 2009

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FEROZSONS LABORATORIES LIMITED

COURSE: - INTRODUCTION TO BUSINESS FINANCE

COMPANY: FEROZSONS LABORATORIES LIMITED

REPORT ON: FINANCIAL RATIO ANALYSIS

SUBMMITTED BY: NAVEED SHERAZ

STUDENT ID: SP09-MM-0054

SUBMMTION DATE: - 10TH

04 Cross sectional analysis table 12

05 Graphical presentation on cross 18

06 Time series analysis 28

07 Graphical presentation on time series 39

08 Common size balance sheet 50

09 Common size income statement 54

12 Pro forma balance sheet 57

13 Pro forma income statement 60

November 10, 2009

MR. OMAR KHALID GENERAL MANAGER EXECUTIVE DIRECTOR

MRS. MUNIZE AZHAR NON-EXECUTIVE

MR. FAROOQ MAZHAR NON-EXECUTIVE

MR. NIHAL CASSIM NON-EXECUTIVE

MR. M.M. ISPAHANI NON-EXECUTIVE

MR. DOST M. KHAN NON-EXECUTIVE

MR. M. KHALIL MAIN NON-EXECUTIVE

world class medicines at locally relevant prices.

Strive to provide best-in-industry

returns to our shareholders.

Be the Second to None in Employee Training,

Reward and Motivation.

Maintain the Highest Levels of Ethics

while focusing on building our portfolio

S.N RATIOS FORMULA 2006 2007 2008 Page

1. CURRENT RATIO Current assets__ 317,048, 442,376,9 509,539,1

Current liabilities 110,712, 154,258,2 196,169,6

2.86 2.86 2.59

2. QUICK RATIO Quick assets___ 111,562, 260,587,9 254,736,2

Current liabilities 110,712, 154,258,2 196,169,6

1.00 1.68 1.29

3. CASH RATIO Cash_______ 12,301,8 41,680,94 35,807,46

Current liabilities 110,712, 154,258,2 196,169,6

0.11 0.27 0.18

4. WORKING CAPITAL Current assets - 317,048, 442,376,9 509,539,1

206,336 288,118, 313,369,

5. DEBT RATIO Total 162,944, 278,772,4 403,380,2

Total assets 942,466, 1,218,361 1,481,628

6. DEBT TO EQUITY Total 162,944, 278,772,4 403,380,2

7. TIME INTEREST Operating 318,137, 258,513,1 294,149,4

Interest expense 2,268,56 1,663,208 1,487,228

8. A/R TURNOVER Net credit sales 752,221, 922,368,5 932,297,9

59.64 41.40 33.06

9. AVG.COLLECTION 360____ 360_ 360_ 360_

6 days 9 days 10.88

10. INVENTORY COGS_________ 322,838, 415,507,4 391,559,4

2.22 2.97 2.48

11. FIXED ASSETS Net sales__ 752,221, 922,368,5 932,297,9

1.20 1.18 0.95

12. TOTAL ASSETS Net sales_ 752,221, 922,368,5 932,297,9

0.79 0.75 0.62

13. GROSS PROFIT Gross profit 429,383, 506,861,0 540,738,5

57% 0.54*10 0.58*100

S.N RATIOS FORMULA 2006 2007 2008

14. OPERATING Operating profit 220,405, 360,176,3 294,149,4

29% 28% 31%

15. NET PROFIT Net profit 175,868, 200,254,1 217,023,8

57% 0.5410 0.58100

0.23100 0.21100 0.23*100

0.19100 0.16100 0.15*100

0.34210 0.29310 0.262*10