Ratio Analysis

1. PAF-Karachi Institute of Economics & Technology
RATIOS ANALYSIS
Presented by:
TOUFEEQ AHMED
Registration # 55302
Introduction to Business Finance
Course Facilitator: Sir Sikandar Taj

2. ENGRO FOODS LIMITED
Overview:
Engro Foods Limited was officially launched as a fully owned subsidiary of Engro in
2004. Using dairy as a stepping stone to enter into the food business, the Company
has established state-of-the-art processing units in Sukkur and Sahiwal, along with an
ice cream production facility in Sahiwal.
Top quality brands like Olper’s, Olwell, Tarang, Omore and Owsum have been
successfully launched under the helm of Company’s dairy products. To support these
brands and their highest standards of quality, Engro Foods has invested heavily in
milk processing and milk collection infrastructure.

3. ENGRO FOODS
Ratio Analysis

4. Ratio Analysis

5. Ratio Analysis
1. Liquidity – the ability of the firm to pay its way
2. Investment/shareholders – information to enable decisions to be made on
the extent of the risk and the earning potential of a business investment
3. Gearing – information on the relationship between the exposure of the
business to loans as opposed to share capital
4. Profitability – how effective the firm is at generating profits given sales and
or its capital assets
5. Financial – the rate at which the company sells its stock and the efficiency
with which it uses its assets

6. Ratio Analysis
Financial Data Values in '000
Input Data 2008 2009 2010
Current assets 12,042,221 10,748,871 3,114,550
Fixed assets 45,122,518 82,960,567 27,896,393
Total assets 57,164,739 93,709,438 31,010,943
Average total assets 28,582,370 46,854,719 15,505,472
Cash and cash equivalents 1,687,038 3,955,342 808,584
Inventory 4,680,896 422,607 2,551,752
Average inventory 4,680,896 2,551,752 1,487,179
Current liabilities 5,999,353 6,395,469 3,654,457
Total liabilities 36,111,133 66,821,200 3,657,304
Owners' equity 21,053,606 26,888,238 27,053,639
Number of common shares 212,816,117 297,942,563 327,736,819
Average number of common shares 212,816,117 255,379,340 312,839,691
Average owners' equity 21,053,606 23,970,922 26,970,939
Market price per share 96.46 183.27 193.81
Devidend Paid 425,632 595,885 555,473
Book Value per share 98.93 105.29 86.48
Total Sales 23,317,198 30,171,520 26,744,359
Operating expenses 1,657,815 195,176 388,652
Operating income 4,538,748 4,986,168 4,762,458
Other expense 579,556 424,110 38,773
Earnings before interest and taxes 6,713,522 6,535,525 1,904,106
Interest expense 1,508,948 1,320,579 92,131
Net income 4,240,430 3,957,250 1,675,959

7. 1. Liquidity Ratio
Ratio Analysis
1. Current Ratio:
Current Assets
Current Liabilities
2008 2009 2010
12,042,221 2.01 10,748,871 1.68 3,114,550 0.85
= = =
5,999,353 6,395,469 3,654,457
Comments:

8. 1. Liquidity Ratio
Ratio Analysis
2. Quick Ratio::
Current Assets – Inventory
Current Liabilities
2008 2009 2010
12,042,221 - 4,680,896 = 1.23 10,748,871 - 422,607 = 1.61 3,114,550 - 2,551,752 = 0.15
5,999,353 6,395,469 3,654,457
Comments:

9. 1. Liquidity Ratio
Ratio Analysis
3. Net Working Capital Ratio:
Current Assets – Current Liability
Total Assets
2008 2009 2010
12,042,221 - 5,999,353 = 0.11 10,748,871 - 6,395,469 = 0.05 3,114,550 - 3,654,457 = (0.02)
57,164,739 93,709,438 31,010,943
Comments:

10. 1. Liquidity Ratio
Ratio Analysis
4. Cash Ratio:
Cash & Cash Equivalent
Current Liability
2008 2009 2010
1,687,038 = 0.28 3,955,342 = 0.62 808,584 = 0.22
5,999,353 6,395,469 3,654,457
Comments:

11. 1. Liquidity Ratio
Ratio Analysis
5. Operating Ratio:
Operating Expenses
Operating Income
2008 2009 2010
1,657,815 = 0.37 195,176 = 0.04 388,652 = 0.08
4,538,748 4,986,168 4,762,458
Comments:

12. 1. Liquidity Ratio
Ratio Analysis
6. Operating Expenses to Sales:
Operating Expenses
Total Net Sales
2008 2009 2010
1,657,815 = 7.11% 195,176 = 0.65% 388,652 = 1.45%
23,317,198 30,171,520 26,744,359
Comments:

13. 2. Assets Ratio
Ratio Analysis
7. Inventory Turnover Ratio:
Total Sales
Average Inventory
Comments:

14. 2. Assets Ratio
Ratio Analysis
8. Fixed Assets Turnover Ratio::
Total Sales
Fixed AssetsIf
2008 2009 2010
52% = 23,317,198 36% = 30,171,520 96% = 26,744,359
45,122,518 82,960,567 27,896,393
Comments:

15. 2. Assets Ratio
Ratio Analysis
9. Total Assets Turnover Ratio:
Total Sales
Total Assets
2008 2009 2010
41% = 23,317,198 32% = 30,171,520 86% = 26,744,359
57,164,739 93,709,438 31,010,943
Comments:

16. 2. Assets Ratio
Ratio Analysis
10. Assets to Equity Ratio:
Total Assets
Owner’s Equity
2008 2009 2010
2.72 = 57,164,739 3.49 = 93,709,438 1.15 = 31,010,943
21,053,606 26,888,238 27,053,639
Comments:

17. 3. Profitability Ratio
Ratio Analysis
11. Return on Assets Ratio:
Net Income
Average Total Assets
2008 2009 2010
15% = 4,240,430 8% = 3,957,250 11% = 1,675,959
28,582,370 46,854,719 15,505,472
Comments:

18. 3. Profitability Ratio
Ratio Analysis
12. Return on Equity Ratio:
Net Income
Average Owner’s Equity
2008 2009 2010
0.20 = 4,240,430 0.17 = 3,957,250 0.06 = 1,675,959
21,053,606 23,970,922 26,970,939
Comments:

19. 3. Profitability Ratio
Ratio Analysis
13. Profit Margin Ratio:
Net Income
Total Net Sales
2008 2009 2010
18% = 4,240,430 13% = 3,957,250 6% = 1,675,959
23,317,198 30,171,520 26,744,359
Comments:

20. 3. Profitability Ratio
Ratio Analysis
14. Basic Earning Ratio:
Earning Before Interest & Taxes
Total Assets
2008 2009 2010
12% = 6,713,522 7% = 6,535,525 6% = 1,904,106
57,164,739 93,709,438 31,010,943
Comments:

21. 4. Debt Ratio
Ratio Analysis
15. Total Debt Ratio:
Total Liabilities
Total Assets
2008 2009 2010
0.63 = 36,111,133 0.71 = 66,821,200 0.12 = 3,657,304
57,164,739 93,709,438 31,010,943
Comments:

22. 4. Debt Ratio
Ratio Analysis
16. Interest Coverage Ratio:
EBIT
Interest Expense
2008 2009 2010
4.45 = 6,713,522 4.95 = 6,535,525 20.67 = 1,904,106
1,508,948 1,320,579 92,131
Comments:

23. 4. Debt Ratio
Ratio Analysis
17. Debt/Equity Ratio:
Total Liability
Owner’s Equity
2008 2009 2010
1.72 = 36,111,133 2.49 = 66,821,200 0.14 = 3,657,304
21,053,606 26,888,238 27,053,639
Comments:

24. 5. Market Ratio
Ratio Analysis
18. Earning Per Share (EPS) Ratio:
Net Income
Average No. of Common Stock
2008 2009 2010
19.93 = 4,240,430,000 15.50 = 3,957,250,000 5.36 = 1,675,959,000
212,816,117 255,379,340 312,839,691
Comments:

25. 5. Market Ratio
Ratio Analysis
19. Prince to Earning Ratio:
Market Price Per Share
Earning Per Share
2008 2009 2010
4.84 = 96.46 11.83 = 183.27 36.18 = 193.81
19.93 15.50 5.36
Comments:

26. 5. Market Ratio
Ratio Analysis
20. Dividend Payout Ratio:
Dividend Paid
Net Income
2008 2009 2010
0.10 = 425,632 0.15 = 595,885 0.33 = 555,473
4,240,430 3,957,250 1,675,959
Comments:

27. Questions