Vertical Analysis

Statement
September 2012

Shakarganj Mills Limited

Income
As at 30

Continuing operations:
Sales

2012

2011

2010

2009

2008

14,762,318 100.0% 13,354,705 100.0% 7,745,611 100.0%

5,101,667

100.0%

6,789,572

100.0 %

-13,044,568 -88.4% -12,061,782 -90.3% -7,003,746 -90.4%

-4,783,640

-93.8%

-6,110,885

-90.0 %

1,717,750

11.6%

1,292,923

9.7%

741,865

9.6%

318,027

6.2%

678,687

10.0 %

Gross profit

-352,995

-2.4%

-298,151

-2.2%

-201,182

-2.6%

-221,243

-4.3%

-212,433

-3.1 %

Administrative expenses

-337,108

-2.3%

-245,043

-1.8%

-93,100

-1.2%

-117,110

-2.3%

-164,080

-2.4 %

Distribution and selling costs

-94,933

-0.6%

-171,725

-1.3%

-53,397

-0.7%

-588,183

-11.5%

-171,832

-2.5 %

Other operating expenses

100,628

0.7%

263,163

2.0%

83,165

1.1%

86,202

1.7%

78,126

1.2 %

Other operating income

1,033,342

7.0%

841,167

6.3%

477,351

6.2%

-522,307

-10.2%

208,468

3.1 %

Profit from operations

-729,469

-4.9%

-945,255

-7.1%

-989,230

-12.8%

-1,259,768

-24.7%

-930,339

-13.7 %

Finance cost

138,580

0.9%

55,893

0.4%

-22,229

-0.3%

-59,835

-1.2 %

Share of profit from associates

442,453

3.0%

-48,195

-0.4%

-534,108

-6.9%

-1,841,910

-36.1%

-721,871

-10.6 %

-11,121

1.4 %

Cost of sales

Profit / (loss) before taxation

Taxation

64,140

0.4%

-132,572

-1.0%

-55,860

-0.7%

-17,010

-0.3 %

Associates

-8,117

-0.1%

-25,737

-0.2%

-20,587

-0.3%

-13,150

-0.3 %

Total Tax

56,023

0.4%

-158,309

-1.2%

-76,447

-1.0%

-30,160

-0.6 %

Profit / (loss) for the year from continuing operations

498,476

3.4%

-206,504

-1.5%

-610,555

-7.9%

-1,872,070

-36.7%

-732,992

-10.8 %

124,981

0.9%

-269,172

-3.5%

-85,751

-1.7%

-73,033

-1.1 %

-81,523

-0.6%

-879,727

-11.4%

-1,957,821

-38.4%

-806,025

-11.9 %

Company

Discontinued operations:
Profit for the year from discontinued operations
Profit / (loss) for the year

498,476

3.4%

Financial Ratio Analysis

Solvency
Quick Ratio (Times) = Current Assets Inventory
Current Liabilities
Current Ratio (Times) = ___Current Assets_____
Current Liabilities
Current Liabilities to Net Worth (%) = ___ _Current Liabilities____________
Shareholders equity Intangible Assets
Efficiency
Receivable turnover = ___Net Credit Sales____
Receivables

Collection Period (days) =

365________
Receivable turnover

Sales to Inventory (times)

Assets to Sales (%)
Sales to Net Working Capital (times)
Accounts Payable to Sales (%)
Profitability
Return on Sales (%)

Return on Assets (%)

Return on Net Working Capital (%)

CURRENT RATIO
The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12
months. Current ratio matches current assets with current liabilities and tells us whether the current assets are enough to settle
current liabilities. Current ratio below 1 shows critical liquidity problems because it means that total current liabilities exceed
total current assets. General rule is that higher the current ratio better it is but there is a limit to this. A current ratio higher than
2.5 might indicate existence of idle or underutilized resources in the company. Acceptable current ratios vary from industry to
industry and are generally between 1.5 and 3 for healthy businesses. It is expressed as follows:
Current ratio

For the year 2008 =

= 1.16716839

For 2009

= 0.9106083

For 2010

= 1.121774

For 2011

= 1.176279

For 2012

=1.157982

Current Assets = Cash and balances with treasury banks + Balances with other banks+ Landings to financial institutions +
Investments + Advances
Current liability = Bills payable + Borrowings+ Deposits and other accounts
Analysis

So the current ratio for the year 2011 as well as all the previous years is below the acceptable range. So there is a little concern
for the company for paying its debts over the next 12 months.

CASH RATIO
Cash ratio is the ratio of cash and cash equivalents of a company to its current liabilities. It is an extreme liquidity ratio since
only cash and cash equivalents are compared with the current liabilities. It measures the ability of a business to repay its
current liabilities by only using its cash and cash equivalents and nothing else. A cash ratio of 1.00 and above means that the
business will be able to pay all its current liabilities in immediate short term. Therefore, creditors usually prefer high cash ratio.
But businesses usually do not plan to keep their cash and cash equivalent at level with their current liabilities because they can
use a portion of idle cash to generate profits. This means that a normal value of cash ratio is somewhere below 1.00. It is
expressed as follows:
Cash Ratio

For the year 2007

* 100 = 5.91327%

For 2008

* 100 = 4.9197%

For 2009

* 100 = 4.87039%

For 2010

* 100 = 12.64972%

For 2011

* 100 = 4.98525%

Cash = Cash and balances with treasury banks

Current liability = Bills payable + Borrowings+ Deposits and other accounts
Analysis
The cash ratio for the year 2011 decreased as compare to 2010. The exact decrease is 7.66447%. This shows that bank unable
to improve its liquidity in the year 2011 as compare to 2010.

DEBT RATIO

Debt-to-assets ratio or simply debt ratio is the ratio of total liabilities of a business to its total assets. It is a solvency ratio and it
measures the portion of the assets of a business which are financed through debt. Debt ratio ranges from 0.00 to 1.00. Lower
value of debt ratio is favorable and a higher value indicates that higher portion of company's assets are claimed by it creditors
which means higher risk in operation since the business would find it difficult to obtain loans for new projects. Debt ratio of
0.5 means that half of the company's assets are financed through debts. It is expressed as follow:
Debt ratio

For the year 2007

= 0.803162

For 2008

= 0.850626

For 2009

= 0.846374

For 2010

= 0.814933

For 2011

= 0.848512

Total debt = Bills payable + Borrowings+ Deposits and other accounts+ other liabilities
Total Assets = Cash and balances with treasury banks+ Balances with other banks+ Lendings to financial institutions+
Investments + Advances +Operating fixed assets+ Deferred tax assets+ Other assets
Analysis
The debt ratio for the year 2011 increased as compare to 2010. This indicates that higher portion of bank's assets are claimed
by it creditors which means higher risk in operation since the business would find it difficult to obtain loans for new projects.

RETURN ON EQUITY
Return on equity or return on capital is the ratio of net income of a business during a year to its stockholders' equity during that
year. It is a measure of profitability of stockholders' investments. It shows net income as percentage of shareholder equity.
Return on equity is an important measure of the profitability of a company. Higher values are generally favorable meaning that
the company is efficient in generating income on new investment. Investors should compare the ROE of different companies
and also check the trend in ROE over time. However, relying solely on ROE for investment decisions is not safe. It can be
artificially influenced by the management, for example, when debt financing is used to reduce share capital there will be an
increase in ROE even if income remains constant. It is expressed as follows:

Return on Equity

* 100

For the year 2007

* 100 = 3.6463%

For 2008

* 100 = 2.934%

For 2009

* 100 = -10.687%

For 2010

* 100 = 5.9943%

For 2011

* 100 = 8.4155%

Analysis
The analysis shows that the return on equity has been improved in 2011 as compare to 2010. The exact figure of improvement
is 2.4212% in 2011. Higher value means that the company is efficient in generating income on new investment.

WORKING CAPITAL
Working capital is a measure of liquidity of a business. It equals current assets minus current liabilities. If current assets of a
business at the point in time are more than its current liabilities the working capital is positive, and this tells that the company
is not expected to suffer from liquidity crunch in near future. However, if current assets are less than current liabilities the
working capital is negative, and this communicates that the business may not be able to pay off its current liabilities when due.
It is expressed as follows:
Working Capital
=
Current Assets - Current liability
For the year 2007 =
26,939,619
23,081,176
=
3858443
For 2008
=
28,832,410
31,662,803
=
-2,830,393
For 2009
=
35,518,519
31,662,803
=
3,855,716
For 2010
=
47,235,560
40,156,775
=
7,078,785
For 2011
=
65,103,396
56,221,447
=
8,881,949
Current Assets = Cash and balances with treasury banks + Balances with other banks+ Landings to financial institutions +
Investments + Advances
Current liability = Bills payable + Borrowings+ Deposits and other accounts

Analysis
Working capital of the year 2011 is greater as compare to 2010 as well as all the previous years. So bank is not expected to
suffer from liquidity crunch in near future. However the working capital was negative in the year 2008.

RETURN ON ASSETS
Return on assets is the ratio of annual net income to average total assets of a business during a financial year. It measures
efficiency of the business in using its assets to generate net income. It is a profitability ratio. Thus higher values of return on
assets show that business is more profitable. This ratio should be only used to compare companies in the same industry. The
reason for this is that companies in some industries are most asset-insensitive i.e. they need expensive plant and equipment to
generate income compared to others. Their ROA will naturally be lower than the ROA of companies which are low assetinsensitive. An increasing trend of ROA indicates that the profitability of the company is improving. Conversely, a decreasing
trend means that profitability is deteriorating. It is expressed as follows:
Return on Assets

For the year 2007

* 100 = 0.7177%

For 2008

* 100 = 0.4383%

For 2009

* 100 = -1.642%

For 2010

* 100 = 1.1093%

For 2011

* 100 = 1.2748%

Current Assets = Cash and balances with treasury banks + Balances with other banks+ Landings to financial institutions +
Investments + Advances
Analysis
Thus higher values of return on assets in the year 2011 as compare to all previous years shows that business is more profitable
as compare to previous years. An increasing trend of ROA indicates that the profitability of the organization is improving