Analyzing Financial Ratios
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Financial Performance Of Cherat Cement Company: The performance of Cherat Cement Company is the best among different cement Companies of Pakistan. Recent Statistic has Show that their significant growth has seen in recent year the reasons are export to Afghanistan and construction of dams. With production rate is rising 79% each and export growth rate of 110% show a good future for the company management and those who want to invest.
Analyzing Financial Performance by Using Relevant Financial Ratio: 1. Return on Capital Employed: Formula: Return on Profit Employed= (Profit before Interest and Tax/Capital Employed) X 100 Rs.000 (In Million) Year 2004 2005 2006
Profit before I & T 573668 684007 718747
Capital Employed 1432418 1742471 2112926
Return on profit employed 4.025% 39.25% 34.01%
(Figure-1)
2. Profit Margin: Formula:
Profit Margin=Operating profit/Sales Year 2004 2005 2006
Operating Profit 592781 718037 799111
Sales 2084955 2400530 2434513
Profit Margin 0.284 0.299 0.328
3. Goss Profit Ratio: Formula: Gross Profit Ratio= (Gross profit/sales) x 100 Year 2004
Gross profit 715170
Sales 2084955
X 100 = Gross Profit Ratio 34.30% 1
2005 2006
856408 94563
2400530 2434513
35.67% 3.88%
(Figure-3)
4. Profitability Ratio: Formula: Profitability ratio = (net sales – cost of good sold)/net sales x 100 Year
Net sales
2004 2005 2006
2084955 2400530 2434513
Cost of good sold 1369785 1544122 1488882
/Net sale X 100 =Profitability ratio 0.34% 0.35% 0.38%
5. Net-Profit Ratio: Formula:
Net Profit Ratio =Net Profit/Sales X 100 Year
Net Profit
Sales
2004 2005 2006
425696 512300 53778
1369785 1544122 1488882
X 100 = Net Profit Ratio 31.07% 94.60% 3.61%
Total assets 2182072
Liability ratio 1
6. Liability Ratio: Formula:
Liability ratio = Total debts/Total assets Year 2004
Total debts 2182072
2005 2006
449823 3611889
3202800 3611889
0.14 1
Current liabilities 369844 449823 516444
Current Ratio 24.8 3.07 2.45
7. Current Ratio: Formula:
Current Ratio = Current asset/Current liabilities Year 2004 2005 2006
Current asset 9182072 1384495 1267950
Comparing Data of two Competitor Organizations: Financial Ratio Analysis: Ratio analysis involves methods of calculating and interpreting financial ratios to analyze and monitor the firm’s performance. The basic contributions to ratio analysis are the firm’s income statement and balance sheet.
Comparing data of year 2004 between Cherat Cement Company limited and Lucky Cement Company. Ratio: Return on Profit Employed Profit Margin Gross Profit Ratio Profitability ratio Liability ratio Current Ratio
Cherat Cement Company Lucky Cement Company. 4.025 0.284 34.30 0.34 1 24.8
2.029 6.46 9.95 0.74 1 0.78
3
Analyzing Financial Performance by Using Relevant Financial Ratio: 1. Return on Capital Employed: Formula: Return on Profit Employed= (Profit before Interest and Tax/Capital Employed) X 100 Rs.000 (In Million) Year 2004 2005 2006
Profit before I & T 573668 684007 718747
Capital Employed 1432418 1742471 2112926
Return on profit employed 4.025% 39.25% 34.01%
(Figure-1)
2. Profit Margin: Formula:
Profit Margin=Operating profit/Sales Year 2004 2005 2006
Operating Profit 592781 718037 799111
Sales 2084955 2400530 2434513
Profit Margin 0.284 0.299 0.328
3. Goss Profit Ratio: Formula: Gross Profit Ratio= (Gross profit/sales) x 100 Year 2004
Gross profit 715170
Sales 2084955
X 100 = Gross Profit Ratio 34.30% 1
2005 2006
856408 94563
2400530 2434513
35.67% 3.88%
(Figure-3)
4. Profitability Ratio: Formula: Profitability ratio = (net sales – cost of good sold)/net sales x 100 Year
Net sales
2004 2005 2006
2084955 2400530 2434513
Cost of good sold 1369785 1544122 1488882
/Net sale X 100 =Profitability ratio 0.34% 0.35% 0.38%
5. Net-Profit Ratio: Formula:
Net Profit Ratio =Net Profit/Sales X 100 Year
Net Profit
Sales
2004 2005 2006
425696 512300 53778
1369785 1544122 1488882
X 100 = Net Profit Ratio 31.07% 94.60% 3.61%
Total assets 2182072
Liability ratio 1
6. Liability Ratio: Formula:
Liability ratio = Total debts/Total assets Year 2004
Total debts 2182072
2005 2006
449823 3611889
3202800 3611889
0.14 1
Current liabilities 369844 449823 516444
Current Ratio 24.8 3.07 2.45
7. Current Ratio: Formula:
Current Ratio = Current asset/Current liabilities Year 2004 2005 2006
Current asset 9182072 1384495 1267950
Comparing Data of two Competitor Organizations: Financial Ratio Analysis: Ratio analysis involves methods of calculating and interpreting financial ratios to analyze and monitor the firm’s performance. The basic contributions to ratio analysis are the firm’s income statement and balance sheet.
Comparing data of year 2004 between Cherat Cement Company limited and Lucky Cement Company. Ratio: Return on Profit Employed Profit Margin Gross Profit Ratio Profitability ratio Liability ratio Current Ratio
Cherat Cement Company Lucky Cement Company. 4.025 0.284 34.30 0.34 1 24.8
2.029 6.46 9.95 0.74 1 0.78
3
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