Mithchell's Financial Analysis

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

1

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

2

History Mitchell’s is the oldest food company in Pakistan. It was established in 1933 by Francis J. Mitchell under the name of Indian Mildura Fruit Farms Ltd. After the country gained independence in 1947, the company's name was changed to "MITCHELL’S Fruit Farms (Pvt.) Ltd." with the brand name of "MITCHELL’S". Since its inception, Mitchell’s has gone from strength to strength, not only expanding its product line but also maintaining quality through the years to become one of the largest food companies in the country. From the procurement of best quality raw materials, fresh from our own farms and orchards to the adoption of latest production techniques, Mitchell’s has been in sync with the evolving times. The result of our efforts is that today we are among the market leaders in all our product categories. Not only that, but our products are also gaining a market abroad with exports to several parts of the world including UK, USA, Canada, the Middle-East and South-West Asia where already Mitchell’s is a name to reckon with.

Current Situation Mitchell’s is the only major food company in Pakistan today with fully integrated operations having its own growing and processing facilities at one location. Modern high-volume industrial equipment, professional management and a trained workforce all combine to ensure that Mitchell’s continues its dominance as the innovator, market leader and trend setter. In this regard a major step was taken in 1998, when Mitchell’s became the first food company in Pakistan to achieve ISO 9001 accreditation, thus becoming more competitive on the international stage also. Countrywide sales are managed by fully computerized and inter-linked regional sales offices ensuring a smooth distribution system with nationwide coverage. Highly qualified executives, using modern management tools, UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

3

handle marketing, commercial, financial and accounting functions from the Head Office in Lahore.

Institutional Clients Mitchell’s has successfully catered to the demands of its prestigious clients such as the Pakistan International Airlines (PIA), leading five star hotels and clubs, Utility Stores Corporation, Canteen Stores Department, main stores and reputed restaurants in major cities.

Foreign Licensees In recognition of its dedication to quality and technical expertise, Mitchell’s was also given proprietary rights by L. Rose and Company Ltd. of England in 1946 to become the sole manufacturer and distributor of their world famous Rose’s brand of Lime Juice Cordial and Lime Marmalade in Pakistan and Afghanistan.

Corporate Philosophy The success of Mitchell’s brands is the result of the corporate emphasis laid upon Quality Control reinforced by Research & Development. The R & D section prepares new recipes and formulations whereas the QC section ensures selection of the finest fruits and error free processing and packaging, thus ensuring that all products live up to the consumers’ high expectations. Human Resource is also of the pivotal importance for the Management and employee skills are constantly being updated through training courses and study tours both at home and abroad.

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

4

Factory & Farms: Renala Khurd, District Okara, Pakistan Phones: (044) 2622908, 2635907 & 8 Fax: (044) 2621416 Email: [email protected]

Head Office: 39 A, D-1, Gulberg III, Lahore, Pakistan Phones: (042) 5872392 - 96 Fax: (042) 5872398 Email: [email protected]

Regional Sales Office (Central): Syed House, Canal Berg, 13 K.M. Multan Road, Lahore Phones: (042) 5419350 & 5425478 Fax: (042) 5423732 Email: [email protected]

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

5

Products It is our aim at Mitchell's to provide you with healthy, innovative and best quality food that will tempt your appetite at all times. And not only that, but we also promise convenience and variety at affordable prices. With six categories encompassing over sixty products, we are proud to present the Mitchell's family - products to grace your dining table on the breakfast and dinner occasions as well as products to appease your sweet tooth.

SAUCES

Spice up your life with Mitchell's rich sauces - just what every snack needs!! Prepared from selected, ripe, fresh tomatoes, chillies, garlic and ginger, under strict hygienic conditions, our range of sauces is a culinary treat and includes a host of great tasting concoctions from the ever popular, favorite of the young and old, Tomato Ketchup to the hottest new addition – the Mexican Salsa. Our sauces line is not only a local favorite but is also rapidly gaining a market abroad. The latest addition to the category is the Cooking Paste, a fine blend of Tomatoes, Ginger and Garlic which acts as a quick mixing and cooking ingredient.

Complete Range 1. 2. 3. 4. 5. 6. 7.

Tomato Ketchup Chilli Garlic Sauce Chilli Ginger Sauce Imli Sauce Mexican Salsa Mango Chutney Cooking Paste

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

6

JAMS, JELLIES & MARMALADE Mitchell’s ensures that you enjoy the delicate taste and flavor of the finest fruits of nature the whole year round with its Jams, Jellies and Marmalade. No artificial color and no artificial flavor is our motto! Therefore, our range of fruit preserves is made from the finest, most delicious, sun soaked, freshly plucked apples, apricots, cherries, guavas, mangoes, pineapples, raspberries, strawberries and black currant. Processed under strict hygienic conditions and according to recipes perfected by experts over decades – Mitchell’s products retain the natural aroma, flavor and taste of fruits and preserve the best in nature. With MITCHELL’S you get much more – both in quality and in quantity!

Complete Range

1. Golden Apple Jam 2. Strawberry Jam 3. Mango Jam 4. Mixed Fruit Jam 5. Apricot Jam 6. Black Cherry Jam 7. Blackcurrant Jam 8. Golden Mist Marmalade 9. Rose's Lime Marmalade 10. Olde English Marmalade 11. Apple Jelly 12. Strawberry Jelly 13. Raspberry Jelly 14. Pineapple Jelly 15. Guava Jelly 16. Blackcurrant Jelly 17. Diet Golden Apple Jam 18. Diet Golden Mist Marmalade 19. Diet Mixed Fruit Jam 20. Diet Strawberry Jam

SQUASHES UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

7

Want a refreshing and natural drink? Tired of the same old sherbets? Get refreshed with Mitchell's squashes - just the right thirst quenchers for you and your family. Processed from fresh and sun ripened fruits especially grown on our orchards in Renala, we offer you a range of energizing natural fruit flavors that promise to liven up your day.

Complete Range 1. Mango Squash 2. Orange Squash 3. Pineapple Squash 4. Guava Squash 5. Mixed Fruit Squash 6. Lemon Squash 7. Lemon Barley 8. Lime Cordial 9. Rose' Lime Juice Cordial 10. Lemon Juice 11. Banana Syrup 12. Pomegranate Syrup

PICKELS We can safely vouch for the fact that no meal is complete without Mitchell’s Pickles! Our pickles are a delicate assortment of fruits and vegetables matured through natural processes, and carefully selected spices, made in a truly traditional way and carrying an authentic homemade flavor. New, mouth watering recipes are constantly being formulated to complement the existing range.

Complete Range 1. Mango Pickle 2. Mango Kasaundi 3. Mixed Pickle UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

4. 5. 6. 7. 8. 9.

8

Chilli & Lime Pickle Lime Pickle Garlic Pickle Mango Chutney Tomato Kasaundi Fruit Vinegar

CANNED FOOD For those conscious of time and quality, our range of canned fruits & vegetables remains the favorite. Our ready-to-use products bring convenience along with taste to every kitchen. Mitchell’s offers a pure and consistent quality throughout the year whether it is the “in season” or not.

Complete Range 1. Apple Jam (1050 Gm) 2. Golden Mist Marmalade (1050 Gm) 3. Mixed Fruit Jam (1050 Gm) 4. Mango Jam (1050 Gm) 5. Garden Peas (450 & 850 Gm) 6. Sweet Corn (450 & 850 Gm) 7. Tomato Puree (450 Gm) 8. Fruit Cocktail (850 Gm) 9. Pear Halves (850 Gm) 10. Peach Halves (850 Gm)

CHOCOLATE Festival Enjoy the delightful and irresistible collection of twenty centre-filled morsels wrapped in the finest chocolate containing the purest ingredients. Elegantly presented in an attractive box of gold hues, Mitchell’s Festival is available in ten distinct varieties.

Rainbow

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

9

An assortment of the most popular chocolates made by Mitchell’s ensures that you savour the experience of all our mouth watering recipes in one go!

Golden Hearts An effective way to win the heart of that special person in your life! Smooth milky chocolate with raisins and rice crispies, Golden Hearts expresses your sentiments like no words can. Share it with that special person in your life and travel the exhilarating journey into someone’s affections and win that golden heart!

Jubilee The best selling chocolate in Pakistan! Jubilee is an energizing chocolate bar with a centre of caramel and nougatine. It is now also available in smaller size as Jubilee Junior to meet the smaller pockets.

Discoveree An original recipe! Discoveree combines roasted almonds, pure honey and caramel, cloaked in real chocolate.

Unitee A hard to resist deal! Unitee is a delectable bar consisting of a centre of roasted peanuts, covered with a thick layer of caramel and milk chocolate – appetizing and nutritious.

Twentee – 1 Take a bit and tantalize those tastebuds! Twenty-1 is a crispy, crunchy

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

10

wafer, enrobed in real chocolate that leaves a pleasant, lingering aftertaste.

Luxuree Enjoy a taste of the exotic tropical! Luxuree is a wonderful treat consisting of a pure, white coconut core wrapped in rich, milky smooth chocolate.

CONFECTIONARY Milk Toffees Pure butter and creamy milk – umm mouth watering!!! Enjoy our MILK TOFFEE, immensely popular for its taste, texture and flavor both with children and grown-ups alike.

Butter Scotch Deliciously scrumptious! The pure, smooth taste of dairy butter gives Mitchell’s Butterscotch an irresistible appeal!

Milk Chocolate Éclairs A two-in-one treat! Our Milk Chocolate Éclairs are delectable caramel nuggets filled with soft milk chocolate making them a combination that is hard to resist.

Mango Man A special confection with an authentic aroma of mangoes and a unique, fresh and fruity taste! Mango Man provides an opportunity to enter the world of exotic taste.

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

11

PRODUCTION FACILITIES CHOCOLATE FACTORY CHOCOLATE: From Cacao Pods to Chocolate Bar Chocolate ranks as the favorite flavor of most people - adults as well as children. And yet, few of us know how this popular treat is made. Chocolate making is an art as well as science. Read on and find out how this unique blend is achieved.

Born in the Jungle Chocolates are made from cacao beans which grow inside pods on trees called Cacao tress. Cacao frees are found in tropical jungles in Brazil, Indonesia, Ivory Coast and Ghana. Each pod contains about 20 - 40 cocoa beans. After the beans are removed from the pods, they are fermented in large heaps or piles. The fermentation process takes about a week to complete. After fermentation, the beans are dried. During this time, the shells harden, the beans darken, and the rich cocoa flavor develops. After drying, the beans are ready for transport to the chocolate factory. At the chocolate factory, these beans are cleaned and stored. They are then roasted in large, revolving roasters at very high temperatures. A special hulling machine then takes the dry, roasted cacao beans and separates the shell

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

12

from the bean - called the "nib." This part of the bean is actually used to make chocolate. The nibs now are ready for milling. Milling is a grinding process which turns the nibs into a liquid called chocolate liquor/ cocoa mass - a smooth, dark stream of pure chocolate flavor without any alcohol content. Sometimes instead of using Cocoa liquor/ cocoa mass directly, cocoa powder and cocoa butter are separated from it. Now the cocoa liquor is ready for the rest of the ingredients.

Mixing it up The main ingredients in chocolate are the cocoa powder, cocoa butter, sugar and milk. The whole milk-sugar mixture is slowly dried until it turns into a thick material. At the heart of the chocolate factory goes the central blending operation where the cocoa powder is combined with the milk and sugar. This new mixture is dried into a coarse, brown powder called chocolate crumb.

Crumbing the Chocolate Liquor The raw mixture of milk, liquor, sugar, and cocoa butter is churned until it becomes a coarse, brown powder called "crumb."

Perfecting the Product The chocolate crumb powder is used to make milk chocolate. The crumb travels

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

13

through special steel rollers which grind and refine the mixture, making it smoother. The crumb becomes a thick liquid called chocolate paste. The paste is poured into huge metallic vats called conches. Once inside the conch, large granite rollers smooth out the gritty particles from the crumb. Now the chocolate paste has the smooth and creamy familiar look of milk chocolate and it's ready to be made into our favorite Mitchell's products. The paste is tempered, or cooled in a controlled manner to the right texture and consistency. Other ingredients like Hazelnuts/Almonds can be mixed into the paste during refining to boost up natural taste & flavor.

Tempering the Chocolate The refined chocolate is warmed & cooled in a controlled condition before coating or filling in the moulds in a process called "tempering." This gives chocolate its glossy sheen, and ensures that it will melt properly.

Chocolate Bars Most chocolate bars are made by pouring the warm liquid chocolate paste into moulds. The filled moulds then take a bumpy, vibrating ride to remove air bubbles and allow the chocolate to settle evenly. Finally, they wind their way through a long cooling tunnel where the liquid chocolate is gently chilled into a solid shiny chocolate bar. One important point to remember is that chocolate needs to be stored at appropriate temperatures otherwise its fat content will separate resulting in the appearance of yellowish fat spots on the chocolate surface. This problem is called a fat-bloom. The chocolate bars are now ready for wrapping…... fresh, delicious Mitchell's chocolate! A sophisticated distribution UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

14

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

system makes sure that our chocolate arrives at retail outlets across the country. Thanks for visiting our chocolate factory!

FINANACIAL ANALYSIS LIQUIDITY RATIOS RATIO

2005

2004

RESULT

Current ratio Quick ratio Cash ratio Working capital

1.73 1.70 .082 103691513

1.25 1.10 .035 43313716

Unfavorable Favorable Unfavorable Favorable

Current Ratio 2 Ratio

1.5 1

Current Ratio

0.5 0 2005

2004 Ye a rs

Quick Ratio 2 1.5 1

Quick Ratio

0.5 0 2005

2004

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

15

Ratio

Cash Ratio 0.1 0.08 0.06 0.04 0.02 0

Cash Ratio

2005

2004 Years

Working Capital 150000000 100000000 Working Capital

50000000 0 2005

2004 Years

Comments;

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

16

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

Overall the liquidity position of the company has been improved but still there is need to increase the most liquid assets to enhance the liquidity of the company. The improvement in the current ratio is due to increase in the slow moving assets, like inventory and stock in trade, of the company. The current liabilities of the company also decreased due to the reason that the installments of asset subject to finance lease ended in the year 2004. The company is having no investment in marketable securities. Due to this factor the cash ratio of the company is below standard. The improvement is only due to the increase in cash in 2005 with comparison of 2004. The change in the working capital which is almost 100% is favorable for the company. The increase in the working capital is due to increase in the stock in trade and decrease in current liabilities.

ACTIVITY RATIOS RATIO

2005

2004

RESULT

Inventory turn over Inventory turn over in days Debtors turn over

4.48

5.03

Unfavorable

80 days

72 days

Unfavorable

801.78

348.38

Favorable

Debtor turn over in days Total assets turn over Fix Asset turn over Accounts

.45 days

1.03 days

Favorable

1.67

1.56

Favorable

3.49

3.06

Favorable

3.28

1.88

Unfavorable

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

payable turn over Accounts payable turnover in days Operating Cycle

17

109 days

191 days

Unfavorable

81 days

73 days

Unfavorable

I.T.O

Inventory Turn Over 5.2 5 4.8 4.6 4.4 4.2

Inventory Turn Over

2005

2004 Years

Inventory Turn Over In Days

Days

85 80

Inventory Turn Over In Days

75 70 65 2005

2004 Years

Debtor Turn Over

Debtor Turn Over Ratio 1000 800 600 400 200 0

Debtor Turn Over Ratio

2005

2004 Years

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

18

Debtor Turn Over Ratio In Days

Days

1.5 1

Debtor Turn Over Ratio In Days

0.5 0 2005

2004 Years

Total Assets Turn Over

Total Assets Turn Over Ratio 1.7 1.65 1.6 1.55 1.5 1.45

Total Assets Turn Over Ratio

2005

2004 Years

Fixed Assets Turn Over

Fixed Assets Turn Over Ratio 3.6 3.4

Fixed Assets Turn Over Ratio

3.2 3 2.8 2005

2004 Years

Accounts Payable Turn Over 250 200 150 100 50 0

Accounts Payable Turn Over

2005

2004

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

19

Operating Cycle

Days

85 80 75

Operating Cycle

70 65 2005

2004 Years

Comments; Overall the effectiveness of management has been improved in this year as compared to its performance in the previous year. But more control over stock in trade is required in order to gain better activity. The inventory turn over ratio is unfavorable for the company. The inventory turn over ratio is increased due to increase in the stock in trade. As a result of this increase in inventory turn over ratio the average age of inventory also increased. Therefore the company will have to greater carrying cost but it will also provide protection to the company about becoming stock out. The debtor turn over ratio is favorable for the company. The collection period of the company is decreased. The reason of this decrease is due to the application of strict credit policy by the management. Now the company is in a position to do investment in the marketable securities to enjoy benefits from the early collection of cash from its debtors. The debtor turn over in days also shows that the collection period is less

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

20

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

than one days. Therefore it can be analyzed that most of the sales are on cash. The assts are also utilized well by the management as compared to the previous year which resulted in better total asset turn over ratio in 2005. The increase in the operating cycle is unfavorable for the company. The reason for this increase is increase in the stock in trade which resulted in increase in the average age of the inventory and ultimately the operating cycle increased.

SOLVENCY RATIOS 2005

2004

RESULT

Times Interest Earned Proprietary ratio

3.68

8.29

Unfavorable

52%

53%

Satisfactory

Debt ratio

48%

47%

Satisfactory

Debt to Equity ratio

.357 to 1

.146 to 1

Unfavorable

Rs.

RATIO

Time Interest Earned 10 8 6 4 2 0

Time Interest Earned

2005

2004 Years

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

21

Proprietory Ratio

Ratio

54% 53% 53%

Proprietory Ratio

52% 52% 2005

2004 Years

Debt Ratio

Ratio

49% 48% 48%

Debt Ratio

47% 47% 2005

2004 Years

Debt Ratio

Ratio

0.4 0.3 0.2

Debt Ratio

0.1 0 2005

2004 Years

Comments; UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

22

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

Overall the solvency position of the company is satisfactory and long term investors are in protection against the danger of liquidation of the company. The time interest earned ratio is decreased which is negative for the company. This decrease is due to the increase in the financial charges as the company has obtained loan from ABN AMRO BANK in the year 2005. Now the company has approximately 3 rupees to pay 1 rupee of interest. Therefore it will not favorable for the company to take more long term loan from any source. The amount of loan has also put negative impact on the debt to equity ratio which has increased upto almost 150% as compared to the previous year. The company has no intangible assets. So the debt to tangible net worth will provide same results as debt to equity ratio. So it can be said that the company is in a better position to pay the long term debts from its assets currently in operation.

PROFITABILITY RATIOS RATIOS

2005

2004

RESULT

Net Profit ratio

2.57

3.059

Unfavorable

Operating Profit ratio Gross Profit ratio Operating ratio

5.18

5.823

Unfavorable

15.52

17.08

Unfavorable

11.15

12.49

Favorable

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

Return on Assets Return on Equity Return on Investment Return on Fix Assets

23

4.3

4.76

Unfavorable

8.34

8.96

Unfavorable

4.32

4.76

Unfavorable

8.98

9.3

Unfavorable

Ratio

Net Profit Ratio 3.2 3 2.8 2.6 2.4 2.2

Net Profit Ratio

2005

2004 Years

Operating Profit Ratio

Ratio

6 5.5

Operating Profit Ratio

5 4.5 2005

2004 Years

Ratio

Gross Profit Ratio 18 17 16 15 14

Gross Profit Ratio

2005

2004 Years

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

24

Operating Ratio

Ratio

13 12

Operating Ratio

11 10 2005

2004 Years

Ratio

Return On Assets 4.8 4.6 4.4 4.2 4

Return On Assets

2005

2004 Years

Ratio

Return On Fixed Assets 9.4 9.2 9 8.8 8.6

Return On Fixed Assets

2005

2004 Years

ReturnonOn Equity Return Investment 9.5 4.80% Ratio

4.60%9

Return Return On Equity on

8.5 4.40%

Investment

4.20%8 4.00%

2005

2005 Years

2004

2004

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

25

Comments; In overall profitability perspective the efficiency of the management has been decreased. There are some controllable and some uncontrollable factor behind the scene which caused this result. The gross profit ratio is decreased while the sales of the company has been increased by 16% as compared to year 2004, while the cost of goods sold increased by 18% as compared to previous year. This greater percentage changes in CGS with relevant to increase in sales caused decrease in Gross Profit Ratio. Where as the increase in the CGS is due to some uncontrollable factors like inflation rate, increase in carriage, and increase in prices of Raw Material. The operating expenses of the company are controlled by the management well which resulted in decrease in operating ratio, but the operating profit ratio is decreased a little which is only due to increase in CGS and it also effected the all profitability ratios of the company. Return on investments decreased because the company has no investment outside the business while the company collects their accounts receivables a lot before their UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

26

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

accounts payable. Therefore a lot of cash remains idle in the hands of management. There is no amount available in the account of other income. Return on Equity also decreased due to decrease in net profit and increase in the amount of Equity

MARKET RATIOS RATIO

2005

2004

RESULT

Degree of Financial Leverage Earning Per Share

37.24

13.70

Unfavorable

4.09

4.22

Unfavorable

P/E ratio

15.91

15.45

Favorable

B/V per share

49.14

47.04

Favorable

Dividend Yield ratio Dividend Payout ratio %age of Earnings Retained

.03

.03

No Effect

.48

.47

Favorable

.52

.53

Favorable

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

27

Ratio

Dagree Of Financial Leverges 40 30 20 10 0

Dagree Of Financial Leverges

2005

2004 Years

Earning Per Share

Ratio

4.25 4.2 4.15 4.1 4.05 4

Earning Per Share

2005

2004 Years

Price Earning Ratio 16 15.8 Price Earning Ratio

15.6 15.4 15.2 2005

2004

Ratio

Book Value Per Share 50 49 48 47 46 45

Book Value Per Share

2005

2004 Years

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

28

Dividend Yield Ratio 0.04 0.03 Dividend Yield Ratio

0.02 0.01 0 2005

2004

Dividend Payout Ratio

Ratio

0.49 0.48

Dividend Payout Ratio

0.47 0.46 2005

2004 Years

Percentage Of Earning Retained

Ratio

0.53 0.52

Percentage Of Earning Retained

0.51 0.5 2005

2004 Years

Comments; UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

29

Overall the performance of the company is improved and it is giving signal of security to the prospective investors to invest in the company. There are two types of investors which are interested in these ratios. These are short term investors and long term investors. The position of the company is secure for both long term and short term investors of the company. The Price Earning ratio increased which is due to decrease in the EPS. Therefore the P/E ratio is providing positive signal to the investors EPS ratio is decreased only due to the fewer earnings available for stock holders and earnings decreased due to greater percentage of increase in the Cost of Goods Sold. Book Value per Share is also improved which is due to increase in the amount of equity. This also shows that the company is having suitable equity which will increase the market price of shares. The financial burden of outsiders on the company is increased upto alarming stage. The company was previously not in a position to afford more financial burden but the management decided to take more loan from ABN AMRO Bank which increased the financial burden on company and also due to this reason the earning of the company decreased and the company have to decide to keep less percentage of earning retained in order to maintain their previous amount of dividend. For the long term investors it is a positive signal that the company is satisfying its share holders by keeping fewer amounts itself to pay the same amount of dividend n this year even their earnings decreased as compared to previous year .

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

RATIO

2005

2004

RESULT

Operating cash to currently maturity of long term debt + current payables Operating cash per share Operating cash to dividend Operating cash to total debt

15.36%

30.36%

Unfavorable

4.102

10.289

Unfavorable

2.05

5.149

Unfavorable

8.9%

24.8%

Unfavorable

30

CASH FLOW ANALYSIS

Ratio

Operating Cash to Currently Mutuirity 40.00% 30.00% 20.00% 10.00% 0.00%

Operating Cash to Currently Mutuirity

2005

2004 Years

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

31

Operating Cash Per Share

Ratio

15 10

Operating Cash Per Share

5 0 2005

2004 Years

Operating Cash to Dividend

Ratio

6 4

Operating Cash to Dividend

2 0 2005

2004 Years

Operating Cash to Total Assets

Ratio

30.00% 20.00%

Operating Cash to Total Assets

10.00% 0.00% 2005

2004 Years

Comments; UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

32

The overall position of the company can be said satisfactory as per analysis of statement of cash flow. The operating cash has been decreased upto almost 60% as compared to the previous year which has caused decrease in all the cash flow ratios. The reason for decrease in the operating cash is decrease in the amount of net profit in this year as well as the increase in the stock in trade. Due to decrease in the amount of operating cash the debt paying ability of the company from its internal sources has decreased upto almost 50%. This shows that company is not in a position to get further financial burden from any financial institution. Operating cash to dividend ratio is decreased but still it is positive for the company because the company is still having 2 rupees of cash from its operations in order to give dividend of 1 rupee. The operating cash to total debt also decreased in this year. The reasons behind this decrease are decrease in operating cash and increase in the amount of total debt due to taking loan from ABN AMRO Bank.

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

33

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

TREND ANALYSIS HORIZONTAL ANALYSIS OF INCOME STATEMENT FACTOR

2001

2002

2003

2004

2005

RESULT

Sales

100%

101.8

109.5

102.17

118.17

Favorable change of 4.54%

CGS

100%

101.78

107.5

104.2

122.76

Gross Profit

100%

101.9

118.2

93.3

98.2

Operating Profit

100%

184.8

104.08

69.69

72.05

Profit before Tax Net Profit

100%

79.6

103.73

86.66

55.52

100%

83.51

98.4

56.11

54.52

Unfavorable change of 5.69% Unfavorable change of . 45% Unfavorable change of 7% Unfavorable change of 11.12% Unfavorable change of

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

EPS

100%

83.57

118.18

67.34

65.41

34 11.39% Unfavorable change of 8.65%

Sales 120 110 100 90 2001

2002

2003

2004

2005

2004

2005

Sales

Cosr Of Goods Sold 150 100 50 0 2001

2002

2003 Years

Cosr Of Goods Sold

Gross Profit 150 100 50 0 2000

2001

2003

2004

2005

Years Gross Profit

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

35

Operating Profit 150 100 50 0 2000

2001

2003

2004

2005

Years Operating Profit

Profit Before Tax 150 100 50 0 2000

2001

2003

2004

2005

Years Profit Before Tax

Net Profit 150 100 50 0 2000

2001

2003

2004

2005

2004

2005

Years Net Profit

Earining Per Share 150 100 50 0 2000

2001

2003 Years

Earining Per Share

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

36

Comments; Overall there is decreasing trend in the income statement of the company, if comparison is made by taking year 2001 as base year. In sales there is increasing trend with 4.54% increase on the average in all the five years and this increase is favorable for the company. But the CGS of the company is also increasing every year with a percentage of 5.69% which is greater than increase in the sales. Therefore this increase in the CGS is not favorable for the company. If the increase in the CGS is less than increase in the amount of sale then it is favorable but greater increase in CGS affects the whole performance of the company because the CGS has direct relationship with all other factors of Income Statement. Gross Profit also shows a decreasing trend with .45% decrease on average in all the five years. This decrease is also directly related to the increase in the amount of CGS. The operating profit is fluctuating every year. Sometime there is sudden increase then in the next year there is

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

37

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

sudden downfall. It shows that the management does not have better control over its operating expenses because there is no much greater fluctuation in Gross Profit. So fluctuations in Operating Profit are due to changes in Operating Expenses. There is on the average 11% decrease in the earnings before tax and it is not favorable for the company. The reason for this decrease is that the company has to pay a huge amount of interest on account of interest on loan. In Net Profit there is decrease of 9% approximately on average in all the five years. This decrease in earnings available for stock holders caused an average decrease of 11% in the EPS of the company. Since there were fluctuations in the net profit of the company so the EPS changed every year and there is decreasing trend in EPS on everage in all the years.

HORIZOTAL ANALYSIS OF BALANCE SHEET FACTOR Total Assets

200 1 100 %

Total Current Assets Total Fix Assets

100 %

Cash

100 %

100 %

Total 100 Current % Liabilitie s

2002

2003

2004

2005

RESULT

112.33 134.21 150.41 161.25 Favorable % % % % change of 15.25% 113.9 138.56 136.07 153.65 Favorable % % % % change of 13.41% 110.5 128.78 167.2 169.56 Favorable % % % % change of 17.25% 41.40 84.05 56.53 108.16 Favorable % % % % change of 2% 117.07 156.78 184.10 150.12 Unfavorabl % % % % e change of 12.5%

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

Total Liabilitie s Total Equity

100 % 100 %

64.41 %

84.12 %

38

96.48 %

106.44 Unfavorabl % e change of 1.5% 242.33 270.11 296.73 309.96 Favorable % % % % change of 52.25%

Total Assets 200 150 100 50 0 2001

2002

2003

2004

2005

Years Total Assets

Total Current Assets 200 150 100 50 0 2001

2002

2003

2004

2005

Years Total Current Assets Total Fixed Assets 200 150 100 50 0 2001

2002

2003

2004

2005

Years Total Fixed Assets

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

39

Cash 150 100 50 0 2001

2002

2003

2004

2005

Years Cash

Total Current Liabilities 200 150 100 50 0 2001

2002

2003

2004

2005

Years Total Current Liabilities

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

40

Totol Debts 150 100 50 0 2001

2002

2003

2004

2005

Years Totol Debts

Shareholder's Equity 400 300 200 100 0 2001

2002

2003

2004

2005

Years Shareholder's Equity

Comments; Assets The overall horizontal analysis predicts the positive trend on the asset side of the company. In Total Assets, there is overall increasing trend with the average percentage of 15.25% increase over last five years. The very first reason of this increase is that stock in trade UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

41

amount is very high in years 2004-5, and second reason is that company has acquire a Assets Subject to Finance Lease so why these are obviously favorable for the company. In Total Current Assets, there is also increasing trend with the average percentage of 13.41% over the last five years. So, there is a smooth and positive increase in the current assets. This positive increase in the Current Assets is the result of Strategic Planning formulation and implementation by the management. Total Fixed Assets are also increasing with average percentage of 17.25% over the last five years which is also favorable for the company. The major changes in year 20045 in which the company acquire an asset subject to finance lease. There are lot of fluctuations in cash & cash equivalent in last five year but there is overall 2% increase in cash & cash equivalent in five years. The major fluctuations are in the sudden increase of 52% from year 2004 to year 2005. So, there is overall positive trend in assets side of the balance sheet but when we consider the utilization of asset towards profit, then there is negative result for the company.

Liabilities As per investment pattern current assets are financed by current liabilities so there is 12.5% average increase in current liabilities of the company which is less than increase in total current assets, so this increase is affordable for the company. In the same way total liabilities are also increasing with the average percentage of 1.5% which is also less as compare to the total assets which is obviously favorable for the company.

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

42

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

However, there is also positive increase in equity. Equity is also increasing with the average percentage of 52.25% in last five year. The major change in year 2002 is only due to the issuance of common stock revaluation of assets by the company. Equity is also playing positive role in the smooth increasing of total fixed assets

VERTICAL ANALYSIS OF INCOME STATEMENT (All amounts in %) FACTOR

2001

2002

2003

2004

2005

Sales

100

100

100

100

100

CGS

81.29

81.28

79.81

82.91

84.45

Gross Profit Operatin g Expense s Operatin g Profit EBT

18.71

18.71

20.17

17.08

15.55

10.201

11.63

12.09

12.49

11.15

8.51

7.08

8.08

5.8

5.19

1.305

1.59

7.047

5

3.5

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

43

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

Net Profit

4.64

3.8

5.01

3.06

2.57

CGS 85 80 75 2001

2002

2003

2004

2005

2004

2005

Years CGS

Gross Profit 30 20 10 0 2001

2002

2003 Years Gross Profit

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

44

Operating Expenses 30 25 20 15 10 5 0 2001

2002

2003

2004

2005

Years Operating Expenses

Operating Profit 20 15 10 5 0 2001

2002

2003

2004

2005

Years Operating Profit

EBT 10 7 4 1 -2

2001

2002

2003 Years

2004

2005

2004

2005

EBT Net Profit 10 8 6 4 2 0 2001

2002

2003 Years Net Profit

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

45

Comments; Overall most of the factors of vertical analysis of Income Statement are showing decreasing trend which is not favorable for the company. On average there is increasing trend in the CGS but this increasing trend is due to the inflation factor which is out of control of management. This negative result of CGS has affected the Gross Profit trend which is decreasing and is not favorable for the company. There is increasing trend in operating expenses but overall there is better control of management over the operating expenses. There is also decreasing trend in operating profit which is due to less amount of Gross Profit available. The decreasing trend in the EBT is due to increase in the amount of interest to be paid. The asset subject to finance lease and loan taken from ABN AMRO Bank are the reasons of this decrease in EBT. This decrease in EBT resulted in a decreasing trend in the Net Profit of the company.

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

46

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

VERTICAL ANALYSIS OF BALANCE SHEET (All amounts in %) FACTOR

2001

2002

2003

2004

2005

Total Assets Operatin g Fix Assets Capital Work in Progress Live Stock Store & Spares Stock in Trade Trade Debts Advance s

100

100

100

100

100

34.72

44.62

42.42

34.50

48.06

10.98

.338

.774

15.76

0

.27

.265

.31

.25

.48

2.6

2.26

1.95

1.86

2.16

34.13

39.18

32.70

25.69

31.65

1.21

1.37

1.66

3.06

2.95

12.34

10.57

17.12

16.84

12.22

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

47

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

Cash

FACTOR

3.67

2001

1.35

2.30

1.37

2.46

2002

2003

2004

2005

Issued 14.15 Capital Reserves 3.25

12.60

12.65

11.29

16.53

5.41

2.42

2.16

2.01

Retained Earnings Defferd Taxation Retiremen t Benefits Short Term Running Finance Creditors Accrued

43.21

40.08

39.12

39.67

39.21

3.32

4.74

4.41

4.38

4.83

4.09

3.85

3.43

3.07

2.87

15.35

18.58

19.76

23.57

12.9

11.66

10.96

13.51

15.10

13.43

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

48

Operating Fix Assets 60 40 20 0 2001

2002

2003

2004

2005

Years Operating Fix Assets

Capital Work in Progress 20 10 0 2001

2002

2003

2004

2005

Years Capital Work in Progress

Live Stock 0.6 0.4 0.2 0 2001

2002

2003

2004

2005

2004

2005

Years Live Stock

Store & Spares 3 2 1 0 2001

2002

2003 Years

Store & Spares

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

49

Stock in Trade 45 30 15 0 2001

2002

2003

2004

2005

Years Stock in Trade

Trade Debts 4 2 0 2001

2002

2003

2004

2005

2004

2005

2004

2005

Years Trade Debts

Advances 20 10 0 2001

2002

2003 Years Advances

Cash 4 2 0 2001

2002

2003 Years Cash

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

50

Issued Capital 20 10 0 2001

2002

2003

2004

2005

Years Issued Capital

Reserves 6 4 2 0 2001

2002

2003

2004

2005

2004

2005

Years Reserves

Retained Earnings 45 40 35 2001

2002

2003 Years

Retained Earnings

Defferd Taxation 6 4 2 0 2001

2002

2003

2004

2005

Years Defferd Taxation

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

51

Retirement Benefits 6 4 2 0 2001

2002

2003

2004

2005

Years Retirement Benefits

Short Term Running Finance 30 20 10 0 2001

2002

2003

2004

2005

Years Short Term Running Finance

Creditors Accrued 20 10 0 2001

2002

2003

2004

2005

Years Creditors Accrued

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

52

Comments; Overall there is decreasing trend in the factors considered for the vertical analysis of Balance Sheet. This decreasing trend also indicates poor performance of the company in five comparative years. There is overall increasing trend in the amount of Operating Fix Assets and this trend is favorable for the company. Capital work in Progress is showing increasing trend but in the year 2005 there is no capital work in progress. Live stock is also increasing which is favorable for the company because the company will be in a position to utilize its own live stock at the time of shortage of raw material. The contribution of stock in trade in total assets is showing decreasing pattern. But in 2005 this contribution has been increased which is due to the greater amount of stock in trade. Increasing trend of trade debts is favorable for the company because it means that company is paying after greater period to its creditors. The decreasing trend of cash & equivalents is negative for the company because it reduces the ability of the company to invest outside the business in marketable securities. Issued Capital is showing decreasing trend. So it can be analyzed that the company is getting loan with a greater percentage than their amount of equity. This thing will increase the financial burden on the company. Reserves are also showing decreasing trend which is dependent on the management policy to create reserves from the profit or capital or not. In the same way the retained earnings also dependent upon the decision taken by the management to keep how much portion of profit as retained earnings. UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

53

Short term running finance is indicating increasing trend and it is not favorable for the company. This shows that the company is not abler to meet its current nature expenses and it has to take loan to meet these expenditures. But in the year 2005 it has decreased which is due to better control of management over its operating expenses. There is increasing trend in the Creditors & Accrued. This increasing trend is favorable for the company.

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

54

SWOT ANALYSIS Strengths;      

   

Enough amount of quickly liquidate able assets. Sufficient working capital is available. Debt vs. equity position is favorable. Collection period of the company is very good. Well utilization of assets to generate sales. Keeping the amount of creditors for a longer period of time than its receivable period. Operating Expenses are well managed by the company. Favorable P/E ratio will improve the image of the company. Book Value per share. Dividend payout ratio.

Weaknesses;          

Extra investment in stock in trade. No investment outside the business. Age of inventory increased. Operating cycle increased. Return on investment. Return on equity. Net profit ratio. Increased financial burden on the company. Decrease in EPS. Low Operating cash.

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester

FINANCIAL STATEMETN ANALYSIS OF MITCHELL’S

55

Opportunities  Due to a huge difference between the receivable and accounts payable period the has the opportunity to invest for short marketable securities.  Long term investors can be attracted due dividend payout ratio of the company.

accounts company term in to better

Threats;  The company will have to bear carrying cost due to

increase in the average age of inventory.  The increase in financial leverage will create limitation for the company in selection of source of financing.  Due to low operating cash the company will have to take short term financing which will be available on greater rate.

UNIVERSITY OF THE PUNJAB (Gujranwala Campus)

MBA 4th Semester