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Awami Supermarkets Ltd.

Summarized Income Statements

2001 2002 2003


Rs Million Rs Million Rs Million
Sales 1200 1280 1,540
Cost of Sales 720 780 942
Gross Profit 480 500 598

Administrative Overheads 108 128 164


Marketing Overheads 180 170 165
Financial Overheads 72 72 84
Total Overheads 360 370 413
Profit before Tax 120 130 185
Less Corporation Tax 48 52 74
Profit after Tax 72 78 122
Retained earning brought forward 0 30 33

Profit available for appropriation 72 108 155


Dividends 50 75 122
Retained Earnings carried forward 22 33 33

No of Supermarkets at the end of


80 100 130
year
Awami Supermarkets Ltd.
Summarized Balance Sheets

2001 2002 2003


Rs. Million Rs. Million Rs. Million

Paid Up Share Capital


200 300 400
(Rs. 10 ordinary Shares)

Retained Earnings 30 33 33
Equity 230 333 433
11% Callable Preference Shares 00 200 200
12% Debentures 600 600 700

Trade Payables 80 120 265


Bank overdraft (Average cost 15%) - 40 260
Proposed Dividends 50 75 122
Corporation Tax 40 42 64
1,000 1,410 2,044

Land & Building 336 618 982


Vehicles Furniture & Fitting & Equipment 314 412 496
Stocks 240 300 440
Trade Receivables 50 80 126
Cash at Bank 60 - -
1,000 1,410 2,044
Ratios 2006
1. Trading Ratios
Ratio Formula 2001 %age/Rate

Gross Profit *100 480


Gross Profit as % of Sales 40.00%
Sales 1200

Gross Profit as % of Cost of Gross Profit *100 480


66.67%
Sales Cost of Sales 720

Cost of Sales 720


Rate of Stock Turnover 3 Times
Average Stock 240

Total Assets Turnover Sales 1200


1.2 Times
Average Total Assets 1000

Operating Assets Turnover/ Sales 1200


3.4 Times
Current Assets Turnover Current Assets 350

2. Profitability Ratios

Net Profit After Interest, Tax &


Return on Equity (ROE)
Preference Dividends *100 72 * 100 31%
Average Ordinary Equity 230

Return on Capital Employed Net Profit before Interest but after


( ROCE) Tax * 100 144 17.32%
Capital Employed 830

Net Profit after Tax 72


Return on Assets (ROA) 7.2
Total Assets 1000

Net Profit * 100 120


Net Profit as % of Sales 10%
Sales 1200

Net Profit * 100 120


Net Profit as % of Cost of Sales 16.67%
Cost of Sales 720

Net Profit * 100 120


Net Profit as % of Gross Profit 25.00%
Gross Profit 480

Overhead as a %age of Total Overhead 360 * 100 75%


Gross Profit Gross Profit 480
Net Profit attributed to Ordinary
72
Earnings Per Share (EPS) shareholders 0.36
Number of Ord’ shareholders 200

Market Value of Ordinary Share 12


Price Earning Ratio ( P/E) 33.33
Earnings per share 0.36

EPS* 100 0.36


Earning Yield Rate 3%
Market Value of Ordinary share 12

3. Dividend Ratios

Dividend Declared as a %age of Dividend declared * 100 50 * 100


69%
Profit after Tax Profit after Tax 72

Dividend Cover ( for ordinary Profit after Tax 72


1.44
shares) Dividend Declared 50

Ordinary dividend declared per


0.25 2.083%
Dividend Yield Rate share * 100
Market Value of Ordinary Share 12

4. Capital Ratios

Equity as a %age of Capital Average Equity * 100 230 * 100


27.7%
Employed Total Capital Employed 830

Borrowed Capital as a %age of Total Borrowed Capital * 100 600 * 100


72.3%
Capital Employed Total Capital Employed 830

CWFR: CWVR/ 600


Capital Gearing Ratio 2.6 : 1
Debt : Equity 230

CWFR * 100 600 * 100


Gearing Level 72.3%
Total Capital Employed 830

Interest Expense 72 * 100


Interest Cover Rate 50%
Net Profit before Interest 144

Fixed Assets as a %age of Average Fixed Assets * 100 650 * 100


78%
Capital Employed Capital Employed 830

Working Capital as a %age of Working Capital 180 * 100


22%
Capital Employed Capital Employed 830

5. Liquidity Ratios
Working Capital Ratio/ Current Assets 350
2.05
Current Ratio Current Liabilities 170

Quick Assets: Current Liabilities 110


Quick Ratio / Acid Test ratio 0.64 Times
170

Credit Sales 360


Debtor’s Turnover Ratio 7.2 Times
Average Trade Debtors 50

Annual Cost of Sales 720


Rate of Stock Turnover 3 Times
Average Stock 240

Average Trade Debtors * No. of


50 * 12
Average Credit Allowed Period months/weeks/days in a year 1.66 Months
Total Annual Credit Sales 360

Average Trade Creditors * No. of


80 * 12
Average Credit Received Period months/weeks/days in a year 1.33 Months
Total Annual Credit Purchases 720

Average Stock * No. of


240 * 12
Average Stock Retention Period months/weeks/days in a year 4 Months
Total Annual Cost of Sales 720

Average Stock Retention Period 4


+ +
Working Capital Cycle Average Credit Allowed Period 1.66 4.33 Months
– -
Average Credit Received Period 1.33

Du Point Analysis (2001)


ROE = Return on Sales * Total Assets Turnover * Gearing

= Net profit/Sales * Sales/Total assets * Total assets/Equity

= 72/1200 * 1200/1000 * 1000/230

ROA = 6% * 1.2times
7.2%
ROE =% * 7.2% * 4.3 times
31%

Common Sized Statements


Income statement
Comparative Common Sized
Income Statement Income Statement
2003 2002 2001 2003 2002 2001
Rs. Million Rs. Million Rs. Million as a %age of Sales Figures

Sales 1540 1280 1200 128 107 100%


Cost of sales 942 780 720 131 108 100%
Gross Profit 598 500 480 125 104 100%

Administrative 164 128 108 152 119 100%


Marketing 165 170 180 92 94 100%
Financial 84 72 72 117 100 100%

Total overheads 413 370 360 115 103 100%


Income before tax 185 130 120 154 108 100%

Provision for tax (74) (52) (48) 154 108 100%


Net income 122 78 72 169 108 100%

Balance Sheet
Comparative Common Sized
Balance Sheet Balance Sheet
2003 2002 2001 2003 2002 2001
Rs. Million Rs. Million Rs. Million as a %age of Total assets

0 0 60 0 0 6
Cash
126 80 50 6 6 5
Trade Receivables
440 300 240 22 21 24
Stocks

Current Assets 566 380 350 28 27 35

Land & Buildings 982 618 336 48 44 34


Other Fixed Assets 496 412 314 31 24 29

Total Assets 2,044 1,410 1,000 100% 100% 100%

Bank Overdraft 260 40 0 13 3 0


Trade Payables 265 120 80 13 9 8
Corporation Tax 64 42 40 3 3 4
Proposed Dividend 122 75 50 6 5 5
Current Liabilities 711 277 170 35 20 17

12% Debentures 700 600 600 34 43 60


Total Liabilities 1,411 877 770 69 62 77

Paid Up Share Capital 400 300 200 19 21 20


Retained Earnings 33 33 30 2 3 3
11% Callable
Preference Shares 200 200 0 10 14 0
Total Equity 733 533 230 31 38 23

Total Liabilities & 2,044 1,410 1,000 100% 100% 100%


Equity

Ratios for year 2002


1. Trading Ratios
Ratio Formula 2002 %age/Rate

Gross Profit *100 500 * 100


Gross Profit as % of Sales 39%
Sales 1280

Gross Profit as % of Cost of Gross Profit *100 500 * 100


64%
Sales Cost of Sales 780

Cost of Sales 780


Rate of Stock Turnover 2.9
Average Stock 270

Total Assets Turnover Sales 1280


1.06
Average Total Assets 1205

Operating Assets Turnover/ Sales 1280


3.40
Current Assets Turnover Current Assets 380

2. Profitability Ratios

Net Profit After Interest, Tax &


Return on Equity (ROE)
Preference Dividends *100 78 * 100 23%
Ordinary Equity 333

Return on Capital Employed Net Profit before Interest but


( ROCE) after Tax * 100 150 * 100 13%
Capital Employed 1,133

Net Profit before Tax 130 * 100


Return on Assets (ROA) 9%
Total Assets 1,410

Net Profit * 100 130 * 100


Net Profit as % of Sales 10%
Sales 1280

Net Profit as % of Cost of Net Profit * 100 130 * 100


17%
Sales Cost of Sales 780

Net Profit as % of Gross Net Profit * 100 130 * 100


26%
Profit Gross Profit 500

Total Overhead * 100 370 * 100


Overhead as a %age of
Gross Profit 500 74%
Gross Profit
Net Profit attributed to
78
Earnings Per Share (EPS) Ordinary shareholders 0.26
Number of Ord’ shareholders 300

Price Earning Ratio ( P/E) Market Value of Ordinary Share 14 53.84


Earnings per share 0.26

EPS* 100 0.26


Earning Yield Rate
Market Value of Ordinary share 14 1.85

3. Dividend Ratios

Dividend Declared as a Dividend declared * 100 75 * 100


96%
%age of Profit after Tax Profit after Tax 78

Dividend Cover ( for Profit after Tax 78


1.04 Times
ordinary shares) Dividend Declared 75
Ordinary dividend declared per
Dividend Yield Rate ( for 0.25
share * 100 1.78%
ordinary shares)
Market Value of Ordinary Share 14

4. Capital Ratios

Equity as a %age of Capital Equity * 100 333 * 100


29.39%
Employed Total Capital Employed 1,133

Borrowed Capital as a %age Total Borrowed Capital * 100 800 * 100


70.60%
of Capital Employed Total Capital Employed 1,133

CWFR: CWVR/ 800


Capital Gearing Ratio 2.4 : 1
Debt : Equity 333

CWFR * 100 800 * 100


Gearing Level 70.60%
Total Capital Employed 1,133

Interest Expense 72 * 100


Interest Cover Rate 35.6%
Net Profit before Interest 202

1,030*10
Fixed Assets as a %age of Average Fixed Assets * 100
0 90.9%
Capital Employed
Capital Employed 1,133

Working Capital as a %age Working Capital 103 * 100


9.09%
of Capital Employed Capital Employed 1,133

5. Liquidity Ratios

Working Capital Ratio/ Current Assets 380


1.37 Times
Current Ratio Current Liabilities 277

Quick Ratio / Acid Test ratio Quick Assets:Current Liabilities 80 0.3:1


277

Credit Sales 384


Debtor’s Turnover Ratio 5.90 Times
Average Trade Debtors 65

Annual Cost of Sales 780


Rate of Stock Turnover 2.88 Times
Average Stock 270

Average Trade Debtors * No. of


Average Credit Allowed 65 * 12
months/weeks/days in a year 2.03 Months
Period
Total Annual Credit Sales 384

Average Trade Creditors * No.


Average Credit Received of months/weeks/days in a 100 * 12
1.53 Months
Period year
Total Annual Credit Purchases 780

Average Stock * No. of


Average Stock Retention 270 * 12
months/weeks/days in a year 4.15 Months
Period
Total Annual Cost of Sales 780

Average Stock Retention Period 4.15


+ +
Working Capital Cycle Average Credit Allowed Period 2.03 4.65 Months
– -
Average Credit Received Period 1.53

Du Point Analysis (2002)

ROE = Return on Sales * Total Assets Turnover * Gearing

= Net profit/Sales * Sales/Total assets * Total assets/Equity

= 78/1,280 * 1,280/1,410 * 1,410/533

ROA = 6.1% * 0.9times


5.5%

ROE = 6.1% * 0.9times * 2.65 times


15%
Ratios for year 2003
1. Trading Ratios
Ratio Formula 2002 %age/Rate

Gross Profit *100 598 * 100


Gross Profit as % of Sales 38.8%
Sales 1,540

Gross Profit as % of Cost of Gross Profit *100 598 * 100


63.5%
Sales Cost of Sales 942

Cost of Sales 942


Rate of Stock Turnover 2.5
Average Stock 370

Total Assets Turnover Sales 1,540


0.89
Average Total Assets 1,727

Operating Assets Turnover/ Sales 1,540


2.3
Current Assets Turnover Current Assets 660

2. Profitability Ratios

Net Profit After Interest, Tax &


Return on Equity (ROE)
Preference Dividends *100 122 * 100 19%
Average Ordinary Equity 633

Return on Capital Employed Net Profit before Interest but


( ROCE) after Tax * 100 206 * 100 15%
Capital Employed 1,333

Net Profit before Tax 185 * 100


Return on Asses (ROA) 9%
Total Assets 2,044

Net Profit * 100 185 * 100


Net Profit as % of Sales 12%
Sales 1,540

Net Profit as % of Cost of Net Profit * 100 185 * 100


20%
Sales Cost of Sales 942

Net Profit as % of Gross Net Profit * 100 185 * 100


31%
Profit Gross Profit 598

Total Overhead * 100 413 * 100


Overhead as a %age of
Gross Profit 598 69%
Gross Profit
Net Profit attributed to
122
Earnings Per Share (EPS) Ordinary shareholders 3.05
Number of Ord’ shareholders 40

Market Value of Ordinary Share


Price Earning Ratio ( P/E)
Earnings per share

EPS
Earning Yield Rate
Market Value of Ordinary share

3. Dividend Ratios

Dividend Declared as a Dividend declared * 100 122 * 100


100%
%age of Profit after Tax Profit after Tax 122

Dividend Cover ( for Profit after Tax 100


0.82
ordinary shares) Dividend Declared 122

Dividend Cover ( for ????????? 122


5.55
Preference Shares Preference Dividend Declared 22

Ordinary dividend declared per


Dividend Yield Rate ( for ?????
share * 100
ordinary shares)
Market Value of Ordinary Share

Dividend Yield Rate ( for Preference dividend declared


???????
preference shares) per share * 100
Market Value of Preference
Share

4. Capital Ratios

Equity as a %age of Capital Average Equity * 100 633 * 100


47.5%
Employed Total Capital Employed 1,333

Borrowed Capital as a %age Total Borrowed Capital * 100 700 * 100


52.5%
of Capital Employed Total Capital Employed 1,333

CWFR: CWVR/ 700


Capital Gearing Ratio 1.1 : 1
Debt : Equity 633

CWFR * 100 700 * 100


Gearing Level 52.5%
Total Capital Employed 1,333

Interest Expense 84 * 100


Interest Cover Rate 31.2%
Net Profit before Interest 269
1,478*10
Fixed Assets as a %age of Average Fixed Assets * 100
0 110.9%
Capital Employed
Capital Employed 1,333

Working Capital as a %age Working Capital -145*100


-10.9%
of Capital Employed Capital Employed 1,333

5. Liquidity Ratios

Working Capital Ratio/ Current Assets 566


0.796
Current Ratio Current Liabilities 711

126
Quick Ratio / Acid Test ratio Quick Assets:Current Liabilities 0.17:1
711

Credit Sales 126


Debtor’s Turnover Ratio 1.22 Times
Average Trade Debtors 103

Annual Cost of Sales 942


Rate of Stock Turnover 2.55 Times
Average Stock 370

Average Trade Debtors * No. of


Average Credit Allowed 103 * 12
months/weeks/days in a year 9.8 Months
Period
Total Annual Credit Sales 126

Average Trade Creditors * No.


Average Credit Received of months/weeks/days in a 192.5*12
8.72 Months
Period year
Total Annual Credit Purchases 265

Average Stock * No. of


Average Stock Retention 370 * 12
months/weeks/days in a year 4.7 Months
Period
Total Annual Cost of Sales 942

Average Stock Retention Period 4.7


+ +
Working Capital Cycle Average Credit Allowed Period 9.8 5.8 Months
– -
Average Credit Received Period 8.7

Du Point Analysis (2003)

ROE = Return on Sales * Total Assets Turnover * Gearing


= Net profit/Sales * Sales/Total assets * Total assets/Equity

= 122/1,540 * 1,540/2,044 * 2,044/633

ROA = 7.9% * 0.75times


5.9%

ROE = 7.9% * 0.75times * 3.23 times


19%

A Summary of the Ratios


2001 - 2003
Ratios 2001 2002 2003

Gross Profit as % of Sales 40.00% 39.% 39

Gross Profit as % of Cost of Sales 66.67% 64.% 63.5

Rate of Stock Turnover 3.00 2.9 2.5


Total Assets Turnover 1.20 1.06 0.89

Current Assets Turnover 3.40 3.4 2.3

ROE 31% 23% 19%

ROCE 17.35% 13% 15.45%

ROA 7.2% 9% 9.05%

Net Profit as % of Sales 10.00% 10% 12.%

Net Profit as % of Cost of Sales 16.67% 17% 19.6%

Net Profit as % of Gross Profit 25.00% 26.% 31%

Overhead as a %age of Gross Profit 75% 74% 69%

Earnings per share 3.6 2.6 2.5

Price Earning Ratio ???

Earning Yield Rate ???

Dividend Declared as a %age of Profit after tax 69% 96% 100%

Dividend Cover 1.44 3.5 5.55

Dividend Yield Rate

Equity as a %age of Capital Employed 27.7% 47% 47.5%

Borrowed Capital as a %age of Capital


72.3% 53% 52.5%
Employed

Capital Gearing Ratio 2.6:1 1.5:1 1.1 : 1

Gearing Level 72.3% 71% 52.5%


Interest Cover Rate 38% 35.6% 31%

Fixed assets as a %age of Capital Employed 78% 91% 110.8%

Working Capital as a %age of Capital Employed 22% 9% -10.9%

Working Capital Ratio 2.05 1.37 0.8

Quick Ratio/Acid Test Ratio 1:1.5 0.288 : 1 0.17 : 1

Debtor’s Turnover Ratio 1 time 1.23 times 1.22 times

Rate of Stock Turnover 3 times 2.88 times 2.55 times

Average Credit Allowed Period 12 months 9.75 months 9.8 months

Average Credit Received Period 12 months 10 months 8.72 months

Average Stock Retention Period 4 months 4.15 months 4.7 months

Working Capital Cycle 4 months 3.9 months 5.78 months

Assumptions

1. Market Price of O.Share for 2001 = 12


2. Market Price of O.Share for 2002 = 14
3. Market Price of P.Share for 2002 = 10