ANALYSIS OF FINANCIAL STATEMENTS Final Project Gul Ahmed Textiles Limited Submitted to: Prof. Asif Bashir Submitted by:
Muhammad Naseem Hayat L1F09MBAM2036
Rustam Javed L1F09MBAM2034
Hasan Mir L1F09MBAM0016 Section: A Dated: Friday, 31 August 2012
Contents
Gul Ahmed 3 Firms Comparability: 3 Industry 3 Size of the firm: capitalization 4 Sales 4 Ownership: 5 International: 5 short term credit analysis 6 Analysis of Current Assets and Liabilities: 6 Current Asset Composition: 6 Current Liabilities Composition: 7 Working Capital and Related Ratios: 8 Working Capital: 8 Working Capital of Gul Ahmed:- 8 Current Ratio: 9 Current Asset= current Assets/ Current Liabilities. 9 Current Ratio of Gul Ahmed:- 9 Net Trade
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Situation of business in major non-Pakistani customers:
All the supplies to produce textile products are taken by local suppliers and customers of the company outside Pakistan are increasing with the passage of time. As the sales in 2011 increased by 59.58% as compared to exports of 2010.
short term credit analysis
Analysis of Current Assets and Liabilities:
Current Asset Composition:
The composition of current asset is as follow Description | ANNUAL YEAR 2007 (%) | ANNUAL YEAR 2008 (%) | ANNUAL YEAR 2009 (%) | ANNUAL YEAR 2010 (%) | ANNUAL YEAR 2011 (%) | Stores Spares And Loose Tools | 7.3% | 7.5% | 6.1% | 5.7% | 5.2% | Stock In Trade | 42.7% | 45.1% | 52.8% | 59.2% | 75.9% | Trade Debts | 41% | 39% | 34% | 28% | 15% | Loan And Advances | 3.3% | 3.4% | 2.0% | 1.6% | 1.2% | Prepayments | 0.36% | 0.63% | 0.46% | 0.57% | 0.30% | Other Receivables | 1.2% | 1.1% | 2.2% | 2.8% | 1.6% | Tax Refunds Due | 3.6% | 2.7% | 0.7% | 0.8% | 0.4% | Cash & Bank Balances | 0.53% | 1.07% | 1.35% | 1.02% | 0.61% | Total Current Assets | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | In 2007 the cash & bank balance is 0.53% of the total current assets while it shows increasing trend in 2008 as 1.07% (increase of .54% in cash & bank balance) and in 2009 as 1.35% ( increase of .28% in cash & bank balance). While it shows declining trend in 2010 as 1.02% of total current asset (decrease of .33% in cash & bank balances) and in 2011 as .61% of total current assets
ACC/291 March 25,2012 Liquidity Ratios Current Ratio: Current Assets/Current Liabilities 2005 $14,555,092/ $6,974,752= 2.09:1 2004 $14,643,456/ $6,029,696=2.43:1 Acid Test Ratio: Cash+ Short-Term Investments + Receivables (Net)/ Current Liabilities 2005 $305,563 + $283,583 +$6,133,663/ $6,974,752= .96:1 2004 $357,216 + $133,504 + $5,775,104/ $6,029,696=1.04:1 Receivables Turnover: Net Credit Sales/ Average Net Receivables 2005 $50,823,685/ ($6,133,663 + 5,775,104/2) $50,823,685/ $5,954,384= 8.54 times 2004 $46,044,288/($5,775,104+6,569,344/2) $46,044,288/ $6,172,224=7,46 times Inventory Turnover: Cost of Goods Sold/ Average Inventory 2005 $42,037,624/ ($7,850,970+$7,854,112/2) $42,037,624/$7,852,541=5.35 times
The current cash debt ratio only measures the ability of a firm 's cash, along with investments easily converted into cash, to pay its short-term obligations. In 2007, the company has a current cash debt ratio greater than 1 and is in better financial shape than in 2006, when the ratio was less than 1.
First of which, is the current ratio. It has been rapidly declining since 2000. To me this indicates that there is a liquidity issue. Each year their trade debt increase exceeds the increase of net income for the company. As a result, the working capital has taken a nosedive from $58,650 in 2002 to only $5,466 in 2003.
The graph is in descending order. 1 is year 2013 and 10 is year 2004. The graph above shows that during the earlier years the Return on shareholders’ fund is much higher than the return on capital employed whereas in the later years that is from 2009 onwards the Return on shareholders’ fund and return on capital employed move very close to one another which means that the return on shareholders’ fund for Barclays declined aggressively, whereas after 2011 both lines start touching one another, this means that both these returns have a direct relationship, if one increases the other increases or vice versa. The line for return on total assets almost always touches the x-axis. It was a bit higher than the x-axis in the earlier year but then later on that is after 2009 it touches the x axis throughout till 2013. There is no such relationship of return on total assets with return on shareholders’ fund or return on capital employed which is very prominent in the graph, but one thing is certain, all three returns move together.
Increase in current liabilities Substantial increase in current liabilities weakened the company’s liquidity position. Its current liabilities were US$2,063.94 million at the end of FY2010, a 48.09% increase compared to the previous year. However, its current assets recorded a marginal increase of 25.07% - from US$1,770.02 million at the end of FY2009 to US$2,213.72 million at the end of FY2010. Following this, the company’s current ratio declined from 1.27 at the end of the FY2009 to 1.07 at the end of FY2010. A lower current ratio indicates that the company is in a weak financial position, and it may find it difficult to meet its day-to-day obligations.
Total current assets changed from $142,266,000 to $106,467,000. The majority of the differences of 35,799,000 came from the above.
There are a lot of suppliers available in the market that want to produce for lululemon because of the increased value of the company
In this case, a summary sheet which contains 14 sets of financial data from 14 different industries is provided. The task is to match 14 different firms with 14 industries by distinguishing the differences (e.g. sources of financing, profitability, the inventory turnover and the accounts receivable collection period) in the financial structures.
Moving onto the balance sheet, it is safe to assume that the cash position in the firm will increase the rate of the sales growth going forward. In actuality, cash has historically increased faster than the growth of revenue with 2004 being an exception. To calculate the assumption for accounts receivable, inventory, and accounts payable, we averaged the four years worth of data
This is due to the fact that inventory and accounts receivable are left out of the equation. Based on the cash ratio, this company carries a low cash balance. This may be an indication that they are aggressively investing in assets that will provide higher returns. We need to make sure that we have enough cash to meet our obligations, but too much cash reduces the return earned by the company.
The firm’s accounts receivable ratio increased from 68.71 in 2006 to 74.56 in 2010. This means that it is taking Abbott almost six days longer to collect from its customers today than it did five years ago. Furthermore, the firm’s accounts payable days has decreased from 43.72 in 2006 to 38.22 in 2010. This means that Abbott is paying its suppliers 5½ days earlier today than it did in 2006. A change in the inventory ratio from 8.01 in 2006 to 11.03 in 2010 indicates that it is taking the firm longer to sell finished goods than it used to. The increase in the accounts receivable and inventory ratios, combined with a decrease in the accounts payable ratio, indicates poor working capital management and helps to explain why the firm has increased its holdings of cash and short-term investments. To correct this, Abbott’s managers should focus on collecting cash from its customers faster and delaying payments to its suppliers. To maximize its cash position, the firm would be best served by paying its suppliers in the same amount of time as it collects payment from its customers.
The financial statements included tend to combine cash and marketable securities into a category labeled “cash and cash equivalents”. If the cash ratio is recalculated using this value instead of simply cash than the ratio improves to 1.10, which shows much stronger liquidity capabilities.
Balance Sheet: Assets, such as Cash and Cash equivalents are up over last year by $20.72 million dollars, whereas Short Term Investments where 0 at the end of 2013 they were slightly up to $1.12 by January 3, 2015. Other Assets shows a drop of $8.26 million dollars, mostly in Property, Plant and Equipment. Based on the 10-K report the balance sheet was in the thousands other web based financial reporting sites show the numbers to be in the millions. Upon further review of the Balance Sheet from the financial website “Watch” the break down in Property, Plant and Equipment shows the biggest difference in the Accumulated Depreciation. (Market Watch) The Vertical Ratio for 2014 Total Current Assets is 3% of the Total Assets and in 2013 was also 3%. The Horizontal Ratio for Total Asset were 37% reflecting a change from 2014 at $212.05 and 2013 $195.61 signaling a significant increase in 2014. The 2015 financial were not completed at the time of this report but the
SUPPLIER POWER – MEDIUM: Many producers of textiles, raw materials for apparel, large apparel companies would catch their attention. However some apparel in this industry is
is previously known as Perlis Plantations Berhad. Its corporate head office is found in Kuala