An insight within PIA’s destressed modalities

Objective
The objective of the study is to analyze Pakistan International Airlines (PIA) in terms of
challenges it is facing in the modern business dynamics. It is a well-known fact that Pakistan
International Airlines is not doing well nowadays and is in a constant state of decline. This study
will broach both the qualitative and quantitative factors that have contributed to said decline
(Hasan, 2013).

As PIA is a national asset and has had a fair share of a glorious past of which the whole nation
was proud of. But nowadays it is a far cry from its once glorious past. This report will attempt to
be an insight in PIA’s failing modalities and will create a better understanding of its problems.

Organization Profile
History
Inception
The history of this national flag carrier dates all the way back before the foundation of the nation
itself. As the two parts of Pakistan (East and West) were going to be separated by almost 1800
Kilometers. In June of 1946 the founder of the nation Quaid-e-Azam Muhammad Ali Jinnah
directed a leading industrialist M.A Ispahani to form an Airline, that would later serve as a
national airline. As a result, Orient Airways was born on 23rd October 1946 with headquarters in
Calcutta. It started operations since the June of 1947, two months before the nation even existed
on the map (PIA, 2017).

As the independence of Pakistan caused one of the biggest migrations in the History. Orient,
which had been chartered by the government, helped with the relief operation of the Pakistan and
transferred people between Delhi and Karachi, the two capital cities. Later, Orient moved its
headquarters to Pakistan and established a vital link between Karachi and Dhaka, Pakistan's two
capitals. With a fleet of 2 aircrafts maned by a skeleton crew. Primary the routes were Karachi to
Lahore to Peshawar, Karachi to Quetta to and Lahore to Karachi to Delhi to Calcutta to Dhaka.
In the late 1949, orient steadily grew its fleet and crew. In 1950 it became clear that additional
capabilities were imperative to meet the demand of the sub-continent (PIA, 2017).
PIA’s birth
Being a private company Orient Airways had limited capital and resources. It was not likely or it
to independently grow and expand. Then Pakistan’s government decided to form a state owned
national airline and invited Orient airways to merge with it. PIA (Pakistan International Airline)
formed thence as a result of that merger in 1955. Orient airways acted as a foundation around
which PIA (Pakistan International Airline) was created. The infrastructure inherited by Orient’s
merger proved to be a huge asset and factor on which PIA (Pakistan International Airline)
thrived in its infancy (PIA, 2017).

PIA (Pakistan International Airline) also started international travel services the year it was
inaugurated. This lead to substantial revenues from foreign passengers, leading to assisted
growth. It showed tremendous growth in subsequent years of its launch. By the 60s it was among
the world’s best. This period is known as the “The golden years of PIA” (PIA, 2017).

Golden age of PIA

In the said golden era, PIA set out to make some remarkable achievements. They became the
first Asian airline to operate Jets. Started transatlantic flights from Karachi to New York. Made
record breaking flights in terms of timing. Became the first Non-Communist airline to fly into
China. Introduced designer uniforms for the air hostesses by famous designers such as Pierre
Cardin. Other than the commercial achievements, PIA also supported the nation in times of war.
It provided logistical support in the 65 war (PIA, 2017).

The downfall
The major reason that lead to PIA’s downfall was that being a state held enterprise, it was
eventually treated and regarded as any other government department. This decline showed
prominence since the late 80s and 90s, when the organization was politicized. Being run as a
government institution it naturally ran into high degree of nepotism and employee inefficiency.
By the mid-2000s PIA’s inefficacy spiraled out of control and took nosedive reporting its highest
losses of 35.88 Billion PKR in 2008 fiscal year (Hasan, 2013).

Recently the political appointment of 28 managing directors who lacked the knowledge, skill or
experience in running an airline, clearly depicts the level of nepotism and lack of leadership
(Mooraj, 2017). Ahmad Saeed a form PIA chairman said “It doesn’t matter if someone was hired
to serve tea. After a time, he would become an officer”.
Such nepotism has had taken its fair toll on the organizations performance. The lack of
leadership and foresight lead to a rapid decline in the quantity and quality of the organization’s
fleet. Operation with less than 40 aircrafts most of which have aged to the extent of being
hazardous. Pertaining to this risk, in 2007 the EU banned PIA’s older aircraft from entering its
airspace (Hasan, 2013).

Other than the lack of leadership, PIA has more than three times the staff per aircraft than the
international standards. Although being overstaffed operational efficiency is still low, as the
increasing number of flight cancellations and delays is becoming a norm (Hasan, 2013).

Current Situation
PIA is currently operating with 35 aircrafts in its fleet. The following table shows the
breakdown.

Aircraft Name Number of Average age in

aircraft years
ATR 42 and 72 10 7.7
Airbus A310 3 23.9
Airbus A320 11 11.3
Boeing 777 11 11.6
Total 35 11.4
(plane spotters, 2017)
At present PIA employees, approximately 18000 Full time employees and daily wage labor.
Making the employee to aircraft ratio of 514 employees versus every aircraft in the fleet. This is
among the highest in the world and reflects high levels organizational inefficiency (Siddiqui,
2016).

In terms of debts as of March of 2015 it stood at 248 Billion PKR. They have started to acquire
new streams of debt to pay off the old (Rana, 2015) as the government refused to bailout out
their whole debt.

Recently the government finally intervened with intent of revamping the organization. As the
government finally rejected the privatization plan for PIA (Haider, 2017). By the march of 2016
a bailout of 22 billion PKR was approved. It was followed by a sovereign guarantee of 5 billion
PKR to enable the organization to take more debt (i.e. Federal government’s sovereign guarantee
limit was enhanced from 146 to 151 Billion PKR). But the organization needs cash inflows of at
least 3.8 Billion PKR per month just to pay off its previous debt (Haider, 2017).

PIA has finally proposed a plan to revive the organization with short, medium and long term
goals and actions. The short-term measures to stop hammering money was to cease all operations
being run on losses. Medium term plans include acquisition of new aircrafts and infrastructure as
well as staff cuts. The long-term plans include complete restructuring and overhauling of the
organizations (Haider, 2017).

Research Questions
To get a better understanding of PIA’s destress we will try and answer the following questions:

 What are the financial deficiencies and challenges that PIA is facing when compared to a
benchmark?
 What implications and impacts of the macro environmental factors surrounding PIA?
 What are its weaknesses and strengths of the organization?

Research methodology
The each of afore mentioned questions will be answered using different techniques.

The first question will be answered in light of a financial ratio analysis.

Financial Ratio Analysis

It is a quantitative analysis of the information contained in the financial statements of a company.
This analysis is based on individual items in financial statements such as the income statement,
the balance sheet and the statement of cash flows; The relationship of an element or a
combination of elements are calculated with respect to another element or combination.

It is used to evaluate various aspects of a company's financial or operational performance, such

as its, liquidity, efficiency, solvency and profitability. The tendency of these relationships over
time is studied to judge their progress. Relationships are also compared between different
companies in the same industry to see how they add up and to get an idea of comparative
valuations. For the purpose, of this report PIA’s 3 year ratios will be compared with Emirates
corresponding 3 year ratios that will serve as a benchmark (Salmi & Martikainen, 1994).
Because Emirates is one of the world’s leading airlines and was ranked as number 1 on 2016
(Skytrax, 2016), therefor it will serve as an ideal benchmark.

Generally, ratios are divided among these categories

Liquidity Ratios
These ratios help determine the level of liquidity of a business. Liquidity is a firm’s ability to
convert short term assets to cash and clear its short-term obligations with relative ease. They are
an important determinant for parties concerned with current assets and liabilities of a firm. Ratios
categorized as liquidity ratios are:

 Current ratio
 Quick Ratio
 Cash Ratio

Solvency Ratios
These ratios determine a company’s long term financial survivability and/or outlook. Solvency is
a firm’s ability to pay off long term financial liabilities/obligations. These ratios provide vital
insight to parties such as debt holders, owners, government, instructional investors. Key ratios
include:

 Debt ratio
 Debt to equity ratio
 Debt to capital ratio
 Times interest earned
 Fixed expense coverage ratio

Profitability ratios
These ratios provide an insight in a business’s ability to make profits. They enable analysts to
judge a firm’s performance and efficiency in its capital and asset utilization. Key ratios include:

 Net profit margin

 Gross profit margin
 Operating profit margin
 Return on assets
  Return on capital employed
 Return on equity
 Earnings per share

Activity Ratios
These ratios provide insight in a firm’s operational efficiency, key ratios include

 Inventory turnover ratio

 Days sales in inventory
 Receivables turnover ratio
 Days sales outstanding
 Payables turnover ratio
 Days payable outstanding
 Fixed asset turnover ratio
 Working capital turnover ratio
 Operating cycle
 Cash Conversion Cycle (AccountingExplained, 2017)

Cash flow ratios/Indicatorids

These ratios provide an insight in a firm’s cashflow generation and utilization and their general
outlook. These include ratios such as:

 Operating Cash Flow/Sales Ratio

 Cash flow ratio
 Cash flow margin

Limitations of ratio analysis

Although the ratio analysis in instrumental in providing useful insight about a business’s health,
efficiency and viability. But like any other analysis technique it naturally has limitations, major
limitations are as follows.

1. Ratio analysis essentially yields numbers and not definitive indicators, These numbers
have to be interpreted and are subjective to each analyst own opinion and interpretation.
 Therefor the quality of the analysis can segmentally increase or decrease with the skill,
expertise and experience of the analyst.
2. The ratios of a firm can only be compared to the ratios of similar firms as ratios may not
be comparable among different firms. So, suitable benchmarks must be used for accurate
interpretation of the ratios.
3. Firms in the same industry can be using different accounting standards which can yield
deviations, therefor extra vigilance is required during interpretation.
4. Other than the issue of variability in accounting standards and relevant benchmarks.
Sometimes firms don’t present their financial statements faithfully and are subject to
manipulations. They prove more challenging to compensate for in the calculations and
once again are subjected to the analysts’ expertise (The balance, 2017).

To answer the second question of macro-environmental factors affecting PIA. This study will be
answered with the help of a PEST analysis.

PEST
Developed by Harvard professor Francis Aguilar in 1967 (mind tools, 2016), it’s an acronym for
political, economic, social and technological. As this analysis provides insight in macro
environmental factors relative to the business/entity in question and they directly affect the
business.

Essentially, PEST analysis help in determining how these factors affect performance and
operational capacities of the business in question in the long-term. It is often used in conjunction
with other analytical methods such as SWOT analysis and five Porter forces to get a holistic
picture of the situation and the relevant internal and external factors. This paper will combine
information from a financial ratio analysis, SWOT analysis and PEST analysis to get the
complete picture of both qualitative and quantitative factors that have and are causing turmoil in
PIA.

Its factors gauge the following information.

Political
This factor entails all the government policies, regulations and legal requirements that affect the
general business environment as well as the relevant industry. The major points to be highlighted
in this section include political stability, operating guideline, tax guideline, labor law, safety
regulations, etc. (pestle analysis, 2013).

Economic
This factor entails all the economic factors and conditions that affect the business. It includes
factors such as inflation, economic growth, business cycle, interest rates unemployment, etc.
(pestle analysis, 2013).

Social
This factor entails the relevant social environment, elements such as socio-economic classes,
social demographics, standard of living, cultural implications, etc. It enables the business to
better understand its customers, their needs, requirements and expectations to better shape the
product/service according to the demand (pestle analysis, 2013).

Technological
This factor entails the effect of technological changes, advancements and requirements on a
business (pestle analysis, 2013).

Limitations
Major limitations related to PEST analysis are as following

1. PEST analysis is an assessment of relevant external factors which tend to change over
time.
2. As this analysis is majorly based on macro environmental assumptions, therefor it tends
to be speculative which in turn serves as a bias regarding the accuracy of the analysis.
3. Being a subjective approach the accuracy of the analysis is fundamentally dependent on
the analyst’s ability, experience and expertise (pestle analysis, 2016).

We will conduct a SWOT analysis to answer the third and the final question of this study.

SWOT Analysis:
SWOT analysis is a process to identify strengths, weaknesses, opportunities and threats of an
organization. It is a fundamental analytical framework that evaluates an organization’s (usually a
business, but can use for an industry or a product) potential and capabilities, both by internal
factors (strengths and weaknesses) and external factors (opportunities and threats).
In SWOT analysis the Strengths and Weaknesses helps determine what factors helps the
organization achieve its objectives and what factors act as hurdles that must be negotiated or
minimized to achieve the desired results. Whereas Opportunities and Threats to an organization
help determine the current position and in the future.

Limitations:
As SWOT analysis is a subjective approach, therefor doesn’t include any objective valuation.
Moreover, it ignores measure like cost of capital, profit margins, return on capital, etc. It doesn’t
help determine the value of the company or its assets either.

SWOT only indicate whether a strength, weakness, opportunity or threat is present, but doesn’t
identify its magnitude or significance. It doesn’t account for non-material values, opportunities
or strengths where as its important to include them to get a better understanding of an
organization’s perspective position.

SWOT analysis’s biggest weakness as mentioned before is that it’s a subjective approach.
Whether to include or exclude certain factors is at the analyst’s discretion. Entire analysis relays
on the analyst’s experience, ability, knowledge and judgement therefor there is a high potential
for personal bias (Investopedia, 2017).

Information Sources
For the quantitative part of the analysis (i.e. ratio analysis) data from the PIA’s 2013, 2014 and
2015 annual reports will be used as PIA has not yet published its 2016 annual report. Similarly,
for comparison Emirate’s corresponding year annual reports will be used to calculate ratios.
Emirates serves as a suitable comparable, as it is also an organization owned by UAE’s
government with promising outlooks as it was rated as the number 1 airline in 2016 (Skytrax,
2016) and therefor is a suitable benchmark. But there also exist limitations to the comparison
because differences between the organizations like different accounting policies, different
currencies and different prices to procure aviation fuel. As UAE is a net exporter of oil whereas
Pakistan is a net importer.

For the qualitative part of the analysis (SWOT and PEST analysis) the primary source of
information will be NEWS articles, press releases and public announcements. As the nature of
this analysis is dynamic so it must be up to date regarding the most recent developments.
Because both quantitative and qualitative analysis are subject to the analyst’s interpretations,
therefor personal biases can exist. Although it can be overcome by careful and rational thinking
and critically reviewing own judgement. Other than that, data only from secondary sources is
being used for the analysis therefor extracting useful and relevant information from these sources
is also a challenge.
Analysis
Ratio analysis
Both PIA and Emirates report their financial statements in different currencies as the countries of
their origin are different. Ratio analysis inherently being a common size analysis makes the two
organizations comparable (Ratio tables attached in appendix 1).

Ratio Interpretation
Profitability ratios
Gross profit margin

Figure 1: (Gross Profit Margin)

This ratio determines how much of revenues turn in to gross profits. Gross profit is earned after
paying the cost of goods sold/cost of service provided from revenues. PIA’s gross profit margins
are -0.08, 0.03 and 0.03 in 2013, 2014 and 2015 respectively. This indicates that most of PIA’s
revenues are expended on covering the cost of providing services. A negative figure in 2013
even indicates that PIA wasn’t able to cover the complete cost of providing services from its
revenues. In case of airlines most of the cost of providing service consists of aviation fuel. Slight
improvement of gross profits in 2014 and 2015 indicates a slightly improved cost control. Other
than that, the international dip in oil prices is also a factor in decreasing its cost. Emirates gross
profit margins for the corresponding years are 0.52, 0.52 and 0.48 which clearly shows that PIA
is a long way to go interims of cost control. To further elaborate.

PIA’s current fleet is:

Aircraft Name Number of Average age in

aircraft years
ATR 42 and 72 10 7.7
Airbus A310 3 23.9
Airbus A320 11 11.3
Boeing 777 11 11.6
Total 35 11.4
(plane spotters, 2017)

Emirate’s current fleet is:

Aircraft Name Number of Average age

aircraft
Airbus A319 1 5.7
Airbus A380 94 3.9
Boeing 747 2 9.6
Boeing 777 163 6.5
Total 260 5.6
(plane spotters, 2017)

As the cost of providing service per aircraft for Emirates was USD 12,489,350; USD 12,705,680
and USD 13,846,560 in 2013, 2014 and 2015 (plane spotters, 2017). Compared to PIA’s cost of
providing service per aircraft which was USD 27,892,000; USD 31,240,940 and USD
27,692,340 in the corresponding years (plane spotters, 2017). PIA’s cost of providing service per
aircraft is more than double Emirates is incurring.

The fuel cost as a component of cost of providing service for PIA was 53.42%, 43.52% and
27.80% in 2013, 2014 and 2015. Whereas Emirate’s fuel cost as a component of cost of sales
was 84.55%, 77.96% and 74.54% in the corresponding years. PIA’s lower fuel cost indicates that
costs other than fuel associated with providing service are higher than the benchmark. This
further elaborates PIA’s lack of cost control, as aviation fuel is a primary component in cost of
providing service for an airline as depicted in the benchmark’s structure.

Operating Profit margin

This ratio determines the magnitude of operational expenditures and its effect on an
organization’s operating profits (gross profits – operating expenses). PIA’s operating profit
margins are -0.3174, -0.11358 and -0.1496. Although slight improvement can be observed in the
trend. But being negative and the corresponding Emirates’ operating profit margins being
0.04738, 0.05752 and 0.07173 indicate highly inefficient operations and poor control.

Running an international airline’s infrastructure requires high degree of financing and resources
as depicted by Emirate’s slim operating profit margin following relatively large gross profits. But
as discussed in the organization’s profile it has up to 3 times the normal acceptable employees
per aircraft. This combined with negative gross profit margins signifies highly inefficient
operations and high resource wastage when compared to a benchmark.

Pretax margins (EBT margin)

This ratio helps determine how much revenues get converted to earnings before tax, this enables
us to determine the interest expense burden the company has. PIA’s pretax margin is - 0.4488
- 0.2456 and - 0.4324. This indicates that PIA is paying high interest payments on loan despite
having operating losses. In comparison Emirate’s Pretax margin is 0.0347, 0.0429 and 0.0550.

The spread between the operating profit margin and pretax margin for PIA is 0.13, 0.13 and 0.28
whereas it is 0.01, 0.01 and 0.02 for Emirate’s corresponding years. This shows that PIA has
approximately 13 times greater interest rate burden as compared to Emirates. PIA doesn’t have
the profitability to pay such high interests. Lack of planning and inefficacy has placed PIA into
this position.

PIA’s interest rate for 2013,2014 and 2015 is 0.1053, 0.1155 and 0.2092 compared to Emirate’s
0.0221, 0.0276 and 0.0302 in the corresponding years. PIA has a much higher interest rate as
compared to Emirates due to higher business risk caused by a higher degree of leverage in its
capital structure. PIA’s leverage ratio (debt to equity) is -1.2164, -1.3419 and 1.1696 compared
to Emirate’s 1.7689, 1.6809 and 1.6974 in the corresponding years.

Net profit margin

This ratio determines how much of the revenues finally get transformed into net profits after
settling taxes. PIA’s net profits margins are -0.4650, -0.2700 and -0.4571 as compared to
Emirate’s 0.0338, 0.0423 and 0.0545. Although emirates too have been only able to convert an
average of 4.34% of its revenues and other income into net profits even though Emirates has
approximately 50% gross profits. This shows that high operating costs are associated with an
airlines operation. Therefor it is imperative for PIA to improve its cost control to retain profits.

The tax rates for PIA were -0.0361, -0.0997 and -0.0571 compared to Emirate’s 0.0259, 0.0136
and 0.0090 in the corresponding years. The negative sign in PIA’s tax rate calculation signifies
that even with negative earnings before tax, PIA is paying/ being charged taxes but the exact tax
can’t be clearly deduced due to negative EBT.

To compare the tax rate to the benchmark, we have used spread between Pretax margin and net
profit margin PIA’s spread is 0.0162, 0.0245 and 0.0247 compared to Emirate’s 0.0009, 0.0006
and 0.0005. PIA’s greater spread signifies that the tax rate is approximately 24 themes greater
than what UAE is charging its state-owned airline.

Return on Assets
This ratio indicates the efficiency of a business in terms of generating profits with respect to
assets owned/held. PIA’s ROAs are -0.3572, -0.2001, and -0.2509. PIA’s negative ROA
indicates a lack of efficiency and high resource wastage. It’s high employee to aircraft ratio once
again re-enforces this point. In comparison Emirate’s ROAs are 0.0254, 0.0348 and 0.0444 it’s
average of 0.0343 signifies the demanding operations and costs associated with an airline’s
operation.

Moving from 2013 to 2014 Emirate’s fleet increased by 11.4% and its ROA increased by
27.01%. Then from 2014 to 2015 its fleet increased by 5.39% and ROA grew by 21.62% (plane
spotters, 2017). Whereas PIA’s fleet grew by 10.53% from 2013 to 2014 and it’s ROA grew by
43.98% and from 2014 to 2015 its fleet grew by 42.42% whereas its ROA decreased by 25.39%
in the corresponding year (plane spotters, 2017). PIA’s fluctuating ROA growth compared to
Emirate’s positive growing ROA indicates that despite a healthy growth in its assets (primarily
needed to generate revenues) PIA’s ability to generate profits remains uncertain and poor.

Return on equity
This ratio indicates the returns on the equity invested in a business (i.e. the return an investor is
getting on his investment through a business). PIA’s ROE in 2013, 2014 and 2015 was 0.3086,
0.2194 and 0.2774. The corresponding Emirate’s ROEs are 0.1044, 0.1342 and 0.1672. PIA’s
ROE is distorted as negative net profits divided by equity mathematically yielded positive
returns (But logically you can’t get something from nothing i.e. 0+0 ≠1). To further investigate a
DuPont analysis was conducted as it breakdown ROE into factors that burden it.

DuPont
PIA Emirates
2013 2014 2015 2013 2014 2015
Net Profit (0.4650) (0.2700) (0.4571) 0.034 0.042 0.055
Margin
Asset Turnover 0.7683 0.6052 0.5638 0.751 0.794 0.779
Equity (0.8640) (1.3426) (1.0766) 4.110 3.989 3.937
Multiplier
ROE 0.3086 0.2194 0.2774 0.1044 0.1342 0.1672

Negative equity means net debt based capital structure and negative net profits (losses) only
serve to deplete it, as indicated by PIA’s DuPont analysis. Another interesting factor highlighted
in Emirate’s Dupont is its high Equity Multiplier (a measure of leverage), a high degree of
leasing assets (aircrafts) led to this.

Profitability conclusion
PIA has major financial deficiencies. It has failed to retain revenues in any stage or form. i.e.
PIA started off by making gross losses and then incurred more expenses (had higher spreads
relative to Emirates) from thereon. The organization requires a high degree of cost control, cost
cutting and must reduce resource wastage to retain revenues as profits.
Liquidity Ratios
Current ratio
This ratio indicates a firm’s ability to meet its short-term obligations within the business cycle. It
also acts like an estimate for a firm’s financial health. PIA’s current ratios are 0.1289, 0.1421 and
0.1544 in comparison to Emirate’s current ratios of 1.1158, 0.8435 and 0.8044 in the
corresponding years. Although PIA’s position is showing an improving trend in terms of
liquidity. But nonetheless is inadequate to cover its liabilities as it covers just approximately
14.18 % of them. When compared to Emirates as a bench mark it becomes even more evident.

Major reason for PIA’s lack of liquidity are its organizational inefficiencies, inability to retain
profits and high degree of debts (it has a net debt capital structure).

Quick Ratio
This ratio indicates how much of its liabilities can a business cover with its more liquid current
assets. PIA’s current ratios are 0.1096, 0.1263 and 0.1396 compared to Emirate’s 1.0659, 0.7909
and 0.7487 which signifies PIA’s inadequacy to settle short term liabilities.

The spread between the quick ratio and current ratios 0.02, 0.02 and 0.01. A minimal spread
might indicate efficient inventory usage and more liquid nature of its short-term assets. In
comparison Emirate’s spread is 0.05, 0.05 and 0.06 which is minimal as well and as airlines are
primarily service providers they don’t carry a lot of inventory.

Cash ratio
This ratio indicates that how much of the short-term liabilities can a business cover immediately
with its cash in hand. PIA’s cash ratios are 0.0122, 0.0288 and 0.0377 in comparison to
Emirate’s 0.7846, 0.5107 and 0.4897. PIA’s cash ratio is very low close to insignificant when
compared to Emirates who can cover up to more than half its short-term liabilities with its cash.

Another rational for why airlines should have high cash ratios is that almost all of their sales are
cash based as, payments are collected when tickets are sold (i.e. cash is collected before service
is rendered). Therefor most of their non-cash items are quickly converted into cash thereby
making cash as a major portion of their current asset mix (A*, 2014).
Liquidity conclusion
PIA has a very poor liquidity position, as it can afford to pay only a small fraction of its short-
term liabilities with its short-term assets. This in turn can make it difficult for PIA to raise shorter
financing at a reasonable interest and get good terms with suppliers. PIA has access to short-term
financing and suppliers due to severing guarantee otherwise it would be very difficult to operate
with such poor liquidity.

Activity Ratios
Operating Cycle
This measure indicates the number of days a business takes to sell its inventory and collect cash.
Although PIA primarily being a service provider doesn’t hold inventory to directly sell rather it’s
a part of the cost associated with providing service. Therefor inventory cycles aren’t absolutely
accurate measures for a business of this nature, but nonetheless comparison with a benchmark
will provide insight related to its efficiency.

PIA’s Operating cycle is 83.0659, 79.8683 and 85.0759 compared to Emirate’s 61.9947
57.0502 and 53.1701 corresponding operating cycles. Where Emirate shows improving operating
cycles. PIA’s operating cycles are uncertain which depicts its operational and financial turmoil.

Cash Conversion Cycle

This measure indicates that how long does a business’s cash keeps tied up in inventory until it is
sold and cash is collected from creditors. It is calculated by adding Average Collection period
with Days of inventory on hand and subtracting Days payable outstanding (Avg. Collection
period + Days of Inventory on hand – Days payable outstanding).

Average collection period

This measure indicates the lag in term of days between a credit sale and the cash collection
against it and is calculated by dividing days in an operating period (365 days in this case) by
receivable turnover (365/receivable turnover).

Receivable Turnover Ratio

This ratio indicates a firm’s effectiveness in providing credit terms to customers and its
efficiency in collecting its credit from creditors. PIA’s receivable turnover ratios are 5.2007,
5.3342 and 4.9344, being a consumer service provider its turnover rate indicates inefficacy in
collection. In comparison Emirate’s receivable turnover ratios are 8.0762, 8.8827 and 9.7110. As
PIA is facing financial destress it should increase its receivable collection cycles to boost cash
and improve liquidity.

PIA’s Average collection period is 70.1827, 68.4259 and 73.9711 in comparison Emirate’s
corresponding average collection periods are 45.1948, 41.0912 and 37.5862. Although having
more lenient credit policies help maintain and boost sales. But it hampers cash collection and ties
up capital in the receivables which disallows other obligations to be met.

Days of inventory on hand

This measure indicates the number of days it takes a business to sell its inventory and is
calculated by dividing days in an operating period (365 days in this case) by its Inventory
turnover (365/inventory turnover).

Inventory turnover ratio

This ratio show the number of times a business’s inventory is recycled. As PIA is primarily a
service provider therefor this ratio isn’t a good estimator of its sale efficiency. Its ratios are
28.3316, 31.8990 and 32.8687 respectively and Emirate’s corresponding ratios are 21.7263,
22.8710, and 23.4216. Nonetheless it is directly linked to sales and its inventory cycles do depict
sale efficiency up to a mark. Although PIA’s inventory cycles are as efficient as the bench mark
as they represent relatively acceptable sales cycle. This can be attributed to PIA’s availability in
Pakistan’s domestic market. As the prices are comparable to other airlines i.e. no large discounts
are offered that can boost sales.

PIA’s days of inventory on hand are 12.8832, 11.4424 and 11.1048 in comparison Emirates has
16.7999, 15.9590 and 15.5839 in corresponding year. Although PIA’s inventory cycle is up to
the benchmark but as a service provider inventory cycles are not accurate estimators of sales
efficiency.

Days Payable outstanding

This measure indicates the time (in days) a business takes to pay off its suppliers. It is calculated
by days in an operating period (365 days in this case) by its Payable turnover (365/Payable
turnover).
Account payable turnover
This ratio indicates the number of times a business pays of its suppliers. PIA’s payable turnover
ratios are 1.3556, 1.1027 and 0.9196 compared to Emirate’s payable turnover ratio of 1.2946,
1.3752 and 1.5465 in the corresponding year. Both organization’s payable turnover ratio is same
in 2013 but in the later years Emirate’s Payable turnover improve while PIA’s dose the opposite.
PIA’s deteriorating payable turnover indicates its inability to pay its obligation due to financial
and operational deficiencies. This can lead to tougher credit terms with suppliers.

PIA’s Days payable outstanding are 269.2544, 330.9923 and 396.9195 whereas Emirate’s
corresponding payable days outstanding are 281.9351, 265.4103 and 236.0164. An increasing
number of PIA’s day’s payable can be observed whereas the benchmark days are decreasing.
This indicates PIA’s inability to pay its obligations due to financial distress.

The cash conversion cycle of both PIA and Emirates is calculated in the following table.

Cash Conversion Cycle

PIA Emirates
2013 2014 2015 2013 2014 2015
Avg. 70.1827 68.4259 73.9711 45.195 41.091 37.586
Collection
Period
Days of 12.8832 11.4424 11.1048 16.800 15.959 15.584
inventory on
hand
Days payable 269.2544 330.9923 396.9195 281.935 265.410 236.016
outstanding
CCC (186.1885) (251.1240) (311.8436) (219.940) (208.360) (182.846)

The negative sign signifies that customs pay both these businesses long before they have to pay
their suppliers.

Although credit borrowing from suppliers acts like a source of short term finance but long lags in
paying suppliers can lead to more stringent credit policies. As seen in case of Emirate’s
decreasing negative (i.e. positively increasing) cash conversion cycle caused majorly due to
decreasing days payable, this can be attributed to its improving liquidity position. Whereas PIA’s
cash conversion cycle has shown consistent negative growth. This is due to PIA’s increasing
payable days (the remaining two measures are stable). This signifies PIA’s inability to pay its
suppliers. PSO is its main supplier for aviation fuel and it halted its supply due to PIA’s lack of
ability to pay its dues (Mustafa, 2016).

Asset turnover ratio

Figure 2: Asset turnover ratio

This ratio identifies a business’s efficiency in term of utilizing assets for generating revenues.
PIA’s asset turnover ratio is 0.7683, 0.6052 and 0.5638 compared to Emirate’s asset turnover of
0.7506, 0.7944 and 0.7788 in the corresponding years. A decrease in PIA’s asset utilization
efficiency can be observed, whereas the benchmark’s efficiency is at a constant level throughout
the period.

This indicates deteriorating asset quality or suboptimal capacity utilization or both. An

interesting point observed in the readings is that PIA had better asset efficiency in 2013 than
Emirates. Yet PIA did not earn any profits that year. This once again highlights a lack of cost
control and high resource wastage by PIA.
The average economic lifespan of a modern airliner is 27.4 years (Boeing, 2013). Average life of
PIA’s fleet is 11.4 years with aircrafts reaching up to 23.9 years of age (plane spotters, 2017). In
comparison, average age for Emirate’s fleet is 5.6 years with aircrafts teaching the up to the age
of 9.6 years (plane spotters, 2017). PIA’s fleet’s age is almost double than the benchmark’s. Due
to its aging fleet EU has forbidden PIA aircrafts from entering its airspace as they pose safety
risks.

Interest Coverage ratio

This ratio indicates a business’s ability to cover its interest obligations. PIA’s interest coverage
ratios are -2.4144, -0.8606 and -0.5292 whereas Emirate’s interest coverage ratios are 3.7467,
3.9381 and 4.2933 in the corresponding periods. PIA can’t afford to pay for its interest
obligations due to negative Earnings Before Interest and Tax. Whereas the benchmark
organization can pay approximately 4 times its interest obligations through earning in those
corresponding years.

Activity conclusion
Being an airline it is common practice to collect dues from customers in advance (when thicket is
sold) as depicted in PIA’s short collection period cycles. Short inventory cycles are also because
of the fact the it’s a service provider and not a manufacturing/retail business. PIA as well as the
benchmark have long payable periods/cycles, although it acts as a source of external funding but
PIA’s growing cycles signify its inability to meet obligations. An airline’s major suppliers are its
aviation fuel suppliers in case of PIA it’s PSO, also a state-owned organization. Therefor it can
maintain its long payment cycles but their sustainability is questionable as PSO has halted its
fuel supply due to long unpaid dues by PIA (Mustafa, 2016).

PIA has declining efficiency in terms of asset utilization which is an indicator of its aging fleet
and suboptimal resource management. Other than that PIA can’t afford to cover its interest
obligations with its existing stats of operations. PIA will require government backed (sovereign
guarantee and bailouts) external funding to meet its obligations. As its destressed financial
position will prove difficult to procure additional funds.
Solvency Ratios
Equity ratio
This ratio indicates the settlement equity holders can expect in an event of a business’s
liquidation. PIA’s equity ratios are -1.1574, -0.7448 and -0.9288 compared to Emirate’s 0.2433,
0.2507 and 0.2540 corresponding equity ratio. A negative equity ratio means that the shareholder
(in this case the government of Pakistan) won’t get any returns in case of liquidation. This makes
PIA a national liability rather than an asset.

Debt to asset ratio

This ratio indicates how much of a company assets are financed by debt and is a measure for
financial leverage. PIA’s debt to asset ratios are 1.4078, 1.0040 and 1.0863 compared to
Emirate’s ratios of 0.4304, 0.4214 and 0.4311 in the corresponding tie period. PIA’s greater than
one debt to asset ratio signifies that it owes more than its assets are worth. All its assets are debt
financed and its debts also compensate for negative equity resulting from high accumulation of
losses. Consequently, PIA is highly leveraged and has high risks when it comes to debt security.
It would prove to be very difficult to acquire more debt without government’s intervention.

Debt to equity ratio

This ratio is used to calculate a business’s financial leverage. PIA’s debt to equity ratios are
-1.2164, -1.3479 and -1.1696 compared to Emirate’s 1.7689, 1.6809 and 1.6974 in the
corresponding time period. PIA’s negative debt to equity ratios signify that the equity is virtually
worthless and it is surviving on debt. Such businesses usually don’t survive and PIA still afloat
due to it being backed by the government of Pakistan.

Solvency conclusion
Due to lack of foresight and high inefficiencies PIA has reached a very disadvantageous position
interims of solvency. The organization is virtually insolvent as with its existing capital structure
it won’t be meet its even its debt obligations. The government recently injected 22 Billion PKR
Equity in the business and increased its sovereign guarantee limit by 5 Billion PKR to enhance
the organization’s ability to raise debts (Haider, 2017).

The organization will even more require government bailouts, equity injections and extended
sovereign guarantees to retire significant portions of its debts and improve its equity position.
PIA’s Financial deficiencies
In terms of financial deficiencies PIA has deficiencies in every aspect of its financial flow and
positions. Due inefficiencies in its operations and cost control PIA was unable to retain any
profits a part of income at any point in the income sheet. Other than its inability to retain profits
PIA is also facing higher operating costs, finance cost and taxes as compared to its benchmarks.

PIA also has been found lacking in terms of liquidity, its short-term assets are insufficient in
covering its liquidity needs. This is further explained by its growing cash payment cycle as it is
simply unable to pay its short-term obligations. Even though its major supplier government
owned entities like PSO (as aviation fuel is a major need), but its inability to pay can adversely
affect its viability to do business with.

PIA’s asset’s efficiency has been found to be deteriorating. Despite the fact that PIA has one of
the highest employee to aircraft ratio in the world, deteriorating efficiency also point out to its
aging fleet and inefficient operations and suboptimal resource utilization. Due to no profitability
PIA is unable to meet its interest expenses through the course of normal business.

As PIA has accumulated major losses over the year its solvency position has also deteriorated.
With all assets being financed by debt, the sheer leverage has rendered it insolvent. The negative
equity is also being compensated for by debts. Being a government held organization backed by
sovereign guarantees is keeping it afloat, but its constantly declining financial position can
undermine that if improvements aren’t made.
PEST analysis
Political factors

Pakistan’s political situation historically has not been very stable, that has been a major cause
poor industrial performance in the country. But recent political developments are moving
towards stability. As democratically elected governments are finally completing their terms. The
future outlook is more or less stable (Dawn, 2017).

As PIA’s majority shares are held by the government of Pakistan, therefor political developments
have a profound impact on PIA. As the government has had a history of political appointments
that initially led the airline to such devastation (Hasan, 2013). But recently the government has
intervened to revamp the destressed flag carrier rejecting its privatization proposal (was rejected
by the senate) (Haider, 2016) and making considerable bailouts, equity injections and extending
sovereign guarantees for loan security (Haider, 2017).

As Pakistan has finally overcome the majority terrorism issues prevalent in the country (Zahid,
2017), it has encouraged more tourism and thence a need for transportation.

Economic factors

Due to political instability in the past Pakistan’s economics haven’t been quite stable, but as the
political climate has stabilized so has the economic. Experts believe as CPEC (China Pakistan
Economic Corridor) is nearing its completion that the power shortage might end soon, improving
security with law and order will bolster the economy (Dawn, 2017).

Pakistan Stock Exchange has shown tremendous growth, as the benchmark KSE-100 index is at
approximately 49,000 points. The GDP growth is reaching 5%, the rate of poverty has fallen by
half and over the past few years the terrorism rate has also significantly fallen (Cowen, 2017).

Key economic indicators such as inflation, CPI, GDP deflator, tax rates, interest rates, GDP, etc.
are also expected to remain stable. Whereas the GDP from transportation is expected to grow
(trading economics, 2017). The gross national income per-capita has also grown by 4.67% in
2015 and is expected to grow more. (World bank, 2017)

All these economic indicators indicate a good potential for PIA in the future as the economic
outlook is positive, CPEC can increase demand for air travel. As GDP from transportation is also
expected to grow with gross national income per-capita Pakistani consumers can demand an
increase in improvement in transportation methods as well.

Social Factors

Being a Muslim majority country, around 150,000 people from Pakistan perform Hajj each year
(Abbasi, 2016), being the national flag carrier PIA is the primary transportation provider.

Majority of Pakistan’s industry has been established in Punjab and Sindh, significant travel is
demanded by business people in these regions and they can afford airline travel. PIA flies to 24
locations in Pakistan which no other airline does (PIA, 2017).

Pakistan’s middleclass is booming and was the 18th biggest middleclass in the world in 2015
(Alam, 2015). Due to which the wealth in the country has been increasing by 7.4% for the last
decades, major contributors to this have been the foreign remittances as well as trickle down
effects of foreign investment. Due to this demand for durable goods is on the rise, improved
living standards can also potentially create a need for improved travel facilities (Siddiqui, 2017).

Pakistani customers are becoming more aware and access to information has become easy
universally, this makes it very difficult to hide any miss happening by any business and PIA is no
different (Samaa Web Desk, 2017). News of any lack of service quality or mistakes spreads very
quickly (Lovering, 2010).

As Pakistani people are also becoming more tech savvy so features like e-ticketing and self-
boarding is a good initiative to meet customer expectations.

Originating from a Muslim majority country PIA’s services are particularly designed to serve
such demographics, therefor entering the middle eastern and other Muslim majority markets is
suitable for PIA.

Technological factors

In terms of technology catering customers, PIA’s e-ticketing and online booking solutions is at
par with other airlines. But as inefficiencies are clearly apparent in the organization a proper ERP
(Enterprise Resource Management) system can help boost its efficiency (LORIN M. HITT,
2002).
Other than management systems PIA’s old and aging fleet needs to be replace if it is to compete
with other major airline. Although it has leased B-777 (has more advanced avionics, more range
fuel efficiency and operating cost than the traditional B-747 “Jumbo-Jet”) (Aviator Joe,
2017)but the question of sufficiency still persists. Reasonably upgrading its fleet can allow PIA
to start scheduling flights to destinations has been banned from due to potentially hazardous
aircraft (Hasan, 2013).

The CAA has invested in newer ground and air guidance systems, they enable assisted takeoffs
and landings. Therefor halting of operations during fogs will be lowered (Zubair, 2015).

Macro-environmental factors affecting PIA

Relatively stable political landscape has enabled the whole economy to heal and grow. The
government has finally stated addressing the issue of PIA’s deficiencies and is making
considerable efforts to improve it. The political stability has also enabled more demand for
airline travel in terms of tourism and business trips.

The economic factors indicate stable economic conditions rather slightly improving ones.
Majority of the experts are quite optimistic about the impact of CPEC on the economy of
Pakistan. Other than that, the transportation industry and per capita income of Pakistani people is
also expected to grow that indicates an increase in demand for better modes of travel.

Considering Pakistan’s domestic market, no other airline covers as much destinations as PIA
which can be very beneficial if local demand for air travel increases. Also, being the national flag
carrier it is usually given exclusive transportation rights for particular routes. Catering a Muslim
majority country PIA can cater other Muslim countries.

PIA’s lack of fleet modernization has created technological challenges and gaps, due to which
PIA has been banned from particular roots. Serious investment in PIA’s fleet is need if this gap is
to be covered.
SWOT analysis
Strengths
PIA’s main advantage is that it is a Government owned enterprise which has kept it afloat even
in swear financial destress. Its main hub is at Jinnah International Airport, Karachi. Jinnah
airport has the highest air traffic in all over Pakistan. Last year a total of 55,461 flights moved
through there carrying 6,196,903 passengers (PAKISTAN CIVIL AVIATION AUTHORITY,
2017).

PIA is keeping up with technological trends on the customer end such as e-ticketing, Aircraft
tracking and self-check-in. This is providing PIA with a comparative edge.

PIA is the only airline to travel to 24 destinations within Pakistan (PIA, 2017). Due to this PIA
has the majority share in domestic air travel. It held 51% of the domestic market share in 2015.
Whereas in the same year it held 23% market share in international flights coming in and out of
Pakistan (JCR-VIS Credit Rating Company Limited, 2016).

Halal meals are served onboard PIA, which is preferable/attractive to Muslim travelers. PIA also
runs exclusive flights for Hajj and Umrah (PIA, 2017).

As PIA is government owned, it gets equity injections, bailouts and sovereign guarantee backing
in times of swear financial turmoil that enhances its financial position and credit quality (Haider,
2017).

Weaknesses
The main disadvantages faced by PIA that are restricting profit ability are, government
interference and political appointments over merit (Hasan, 2013).

This led to incapable leadership, lack of farsightedness and over recruitment with less capable
staff. This further led to organization wide inefficiencies and resource wastage (Hasan, 2013).

PIA’s fleet is also aging with lack of planning for replacement aircraft. EU has forbidden all PIA
aircrafts except for B-777 from entering European airspace (Hasan, 2013).

Due to these problems PIA has been facing major losses. The number of flights being cancelled
or delayed are also increasing and the quality of food served onboard is also poor (Hasan, 2013).
PIA is also carrying a high degree of debt on its balance sheet. Due to which high interest
expenses arise and because of its losses it can afford to cover.

Accumulated losses are adding up and further deteriorating PIA’s financial position and the
organization’s financial position if virtually insolvent.

Opportunities

As the China-Pakistan Economic Corridor is in its advanced stages of completion. It can create
immense opportunities for PIA in both foreign and domestic markets (Dawn, 2017).

If PIA manages to update and upgrade its fleet, EU will lift its ban and PIA can start
international routes (BBC, 2007).

Serving halal food PIA can penetrate into more middle eastern countries.

The government of Pakistan has finally taken an interest in revamping the national flag carrier. A
new PIA’s subsidiary by the name of Pakistan Airways Limited has also been authorized with
authorized capital of 100 billion PKR. This subsidiary can enhance the national carrier’s
capabilities (tribune , 2015).

The government has recently increased PIA’s sovereign guarantee backed loan limit which has
increased its borrowing capabilities by enhancing its credit quality (Haider, 2017).

Threats

Due to increasingly poor service quality, PIA’s image can be damaged beyond repair.
A decrease in government backing can decrease PIA’s credit quality constituently decreasing its
ability to borrow.

An increase in oil prices can derive its losses even higher (Schmidt, 2016).

As CEPC is coming near its completion, it can attract new airlines that can snatch its market
share. Other than improved roads in the northern part of Pakistan can also decrease its demand.

The nature of its assets aircrafts in this case is so that a slight mishap can lead to a complete write
off of the aircraft. With its aging fleet, it can become more expensive and difficult to ensure old
aircraft.
PIA’s Strengths and weaknesses
The major strength in PIA’s business model is that it’s a government owned entity. This has
saved PIA from bankruptcy. But this has acted as a double-edged sword and one of the major
reasons behind PIA’s failings is government intervention. Running an airline isn’t as simple as
running any other department. As the industry is very comparative and dynamic, due lack of
foresight the leadership landed PIA in the predicament it is in. Although PIA dominates the
domestic air travel with over 50% market share, but due to flight delays, flight cancelations,
lower perceived quality of service and availability of alternatives. PIA can easily loose its
customer base.
Appendix 1:
PIA Ratios
Supporting Calculations USD USD USD

Current Assets 230,537.4397 308,118.0000 306,154.0000

Current Liabilities 1,788,838.0547 2,168,190.0000 1,982,052.0000
Average Receivables 174,230.2015 211,324.0000 201,971.0000
Total Debt 1,660,450.7333 1,870,151.0000 1,920,279.0000
Average Inventory 34,456.9780 34,278.0000 29,488.0000
EBIT (287,560.0000) (128,035.0000) (149,132.0000)
EBT (406,660.0000) (276,811.0000) (430,921.0000)
Average Trade Payable 720,141.1770 991,556.0000 1,053,992.0000
Tax Rate (0.0361) (0.0997) (0.0571)
Capital employed (609,379.4966) (305,480.0000) (214,403.0000)

Profitability Ratios
Gross profit margin -7.7362% 3.0001% 2.7458%
Net profit margin -46.4972% -27.0043% -45.7073%
op margin -31.7353% -11.3582% -14.9641%
pretax margin -44.8792% -24.5563% -43.2392%
operating ROA -24.3807% -6.8736% -8.4367%
Return on asset -35.7216% -20.0124% -25.0949%
Return on equity 30.8638% 21.9403% 27.7440%
Administration expense to -37.7351%
PBT
Roce 47.1890% 41.9127% 69.5569%
Operating expense ratio 125.2767% 106.6622% 110.1653%

Liquidity Ratios
Acid test ratio 0.1096 0.1263 0.1396
 Cash ratio 0.0122 0.0288 0.0377
Current ratio 0.1289 0.1421 0.1545

Activity Ratios
Net working capital (1,558,300.6150) (1,860,072.000) (1,675,898.0000)
Receivable turnover ratio 5.2007 5.3342 4.9344
Average collection period 70.1827 68.4259 73.9711
Inventory turnover ratio 28.3316 31.8990 32.8687
days sales in inventory 12.8832 11.4424 11.1048
Account payable days 1.3556 1.1027 0.9196
Average payment days 269.2544 330.9923 396.9195
Operating cycle 83.0659 79.8683 85.0759
Cash conversation Cycle (186.1885) (251.1240) (311.8436)
Asset turnover ratio 0.7683 0.6052 0.5638
Interest coverage ratio (2.4144) (0.8606) (0.5292)

Capital/leverage ratios
Equity to asset ratio (1.1574) (0.7448) (0.9288)
Debt to asset ratio 1.4078 1.0040 1.0863
Debt to capital ratio 5.6219 3.8742 6.8971
Debt to equity ratio (1.2164) (1.3479) (1.1696)

Emirates Ratios
Supporting Calculations USD USD USD

Current Assets 9,522,343.3243 7,453,405.9946 7,557,220.7084

Current Liabilities 8,533,787.4659 8,835,967.3025 9,395,367.8474
Average Receivables 2,400,817.4387 2,476,021.7984 2,433,514.9864
Total Debt 11,117,166.2125 11,665,667.5749 13,082,288.8283
Average Inventory 426,158.0381 464,850.1362 522,888.2834
EBIT 918,801.0899 1,265,122.6158 1,695,095.3678
EBT 673,569.4823 943,869.2098 1,300,272.4796
Average Trade Payable 7,151,771.1172 7,730,790.1907 7,919,073.5695
Tax Rate 0.0259 0.0136 0.0090
Capital employed 17,298,092.6431 18,849,046.3215 20,948,501.3624

Profitability Ratios
Gross profit margin 52.2478% 51.6607% 48.1765%
Net profit margin 3.3840% 4.2333% 5.4526%
op margin 4.7387% 5.7522% 7.1729%
pretax margin 3.4739% 4.2915% 5.5022%
operating ROA 3.5568% 4.5697% 5.5863%
Return on asset 10.4401% 3.4795% 4.4411%
Return on equity 10.4401% 13.4153% 16.7185%
Administration expense to 93.6233%
PBT
Roce 5.3116% 6.7119% 8.0917%
Operating expense ratio 95.4213% 94.4073% 93.0216%

Liquidity Ratios
Acid test ratio 1.0659 0.7909 0.7487
Cash ratio 0.7846 0.5107 0.4897
Current ratio 1.1158 0.8435 0.8044

Activity Ratios
Net working capital 988,555.8583 (1,382,561.3079) (1,838,147.1390)
Receivable turnover ratio 8.0762 8.8827 9.7110
Average collection period 45.1948 41.0912 37.5862
Inventory turnover ratio 21.7263 22.8710 23.4216
days sales in inventory 16.7999 15.9590 15.5839
Account payable turnover 1.2946 1.3752 1.5465
Average payment days 281.9351 265.4103 236.0164
Operating cycle 61.9947 57.0502 53.1701
Cash conversation Cycle (219.9405) (208.3601) (182.8463)
Asset turnover ratio 0.7506 0.7944 0.7788
Interest coverage ratio 3.7467 3.9381 4.2933

Capital/leverage ratios
Equity to asset ratio 0.2433 0.2507 0.2540
Debt to asset ratio 0.4304 0.4214 0.4311
Debt to capital ratio 0.6388 0.6270 0.6293
Debt to equity ratio 1.7689 1.6809 1.6974
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