Profitability ratios: Gross profit margin: The gross profit margin indicates the percentage of revenue available to cover

operating and other expenses and to generate profits. The gross profit margin has been quite much fluctuating for Kohinoor Mills from positive to negative to positive. Initially, it was lower than the industry average however in 2012; it is more than the industry average indicating that it has regained its competitive advantage in terms of its better quality and technology. The company has the essentials of a good company however the direction has been laid down again to regain their position in the industry. Decline in raw material prices and optimal capacity utilization throughout the year resulted in significant improvement in gross margins, which together with major savings in fixed costs, due to closure of loss-making hosiery and apparel divisions, resulted in higher operating profits. Due to debt restructuring on favourable terms, there was significant reduction in the finance cost during the current period. Net Profit Margin: The net profit margin has been negative for previous two years however it has turned into positive in 2012 and quite greater than the industrial average. The increasing ratio indicates that the company has gained controlled over its operating costs; they have laid-off their unprofitable divisions and have started to focus on the areas where they can actually excel. So there is a potential to be profitable in the long run. Operating Profit Margin: The operating profit margin initially was very low than the industrial average however in the recent year, it is greater than the industrial average and improving much faster than the gross profit margin indicating that the company has gained control over its operating costs. Working capital shortages due to continued losses made it impossible to operate production facilities at all divisions at an optimal level. However, after completion of the debt restructuring, as discussed earlier, the company has been able to replenish some of its lost working capital. These funds have enabled the company to operate its core businesses again at optimal capacity level.

Return On Capital Employed: The return on capital measures a profit a company earns against all the capital employed. Initially the ratio was below the industry average however significant improvement has taken place in 2012. The significant reasons for this alarming change have been the same described as above. Liquidity Ratios: Current Ratio: It highlights the current assets in relation to the current liabilities. Higher is better. In the case of Kohinoor Mills, the current ratio is low as compared to the industry average in 2010-11. The company incurred loss after taxation of Rupees 1,396 million for the current financial year ended 30 June 2011. These continuing losses have resulted in erosion of company's reserves and depletion of working capital base. The company has defaulted on all its long term loans and most of its short term facilities and mark-up payments. The major reason for its lower current ratio was its reliance on the outside financing to meet its short term obligations. However in 2012, due to debt restructuring and paying off major debt, the company has been able to improvise its current ratio in the recent year. Quick Ratio: The quick ratio, being a conservative ratio only takes into account the most liquid current assets. Higher is better. The quick ratio is showing an increasing trend during the three years. Despite of the fact, it was lower in the first two years however it got its right track in 2012. The lower ratio was due to the fact that the sales of Kohinoor Mills were adversely affected in 2010-11. It declined approximately 20% due to its less demand in the market. As a result of which the company had to bear the inventory cost and wasnt even able to cover its fixed costs resulting in lower liquidity. In 2012, the regain of quick ratio has been due to its increased demand of products also. Activity Ratios: Inventory Turnover and DOH:

This ratio indicates the resources tied up in inventory. Higher turnover ratio and lower DOH indicates efficiency in inventory management. Overall both the ratios have been close to the industrial averages in the three years however, in 2010, company did face sales decline which increased its inventory and resulted in greater carrying costs however with the commencement of 2012, due to efficient strategies of management, the company has been able to perform above average in terms of its inventory Payables Turnover and Numbers of Days of Payables: Payables turnover measures how many times the company pays off all its creditors and number of days of payables reflect the average number of days the company takes to pay off to its suppliers. The payable turnover ratio has been low as compared to the industrial average indicating that Kohinoor Mills have trying to make use of its all the credit facilities they encounter. Their payables increased a lot in the initial years due to the losses they faced. In 2012, due to debt restructuring, certain arrangements such as waiver of the accrued mark-up, mark-up rate ranging from 5% to the cost of funds of the bank, initial grace period of one to two years in repayment of principal and subsequent repayment in 8 to 10 years. As a result of which their number of days of payables have increased significantly and payable turnover ratio further reduced. Total Asset Turnover: It measures the companys total ability to generate revenues with a given level of assets. Higher ratio reflects greater efficiency. From 2010-11, The Company wasnt able to generate revenues favourably from its assets due to the macroeconomic factors of price increase, less demand, in efficiency in management. As per the annual reports, many of its division were not operating up to their full capacity. In 2012, Kohinoor Mills was generating Rs 1.08 of revenue against every Rs. 1 of its average assets. This is only because of their detailed work on revamping of its major strategies. Fixed Asset Turnover: The ratio measures how efficiently the company generates revenues from its fixed assets. Comparing this ratio with the industry average indicates that the company has not been utilizing its fixed assets to their full capacity. The prime reason being the demand decline in their products which made them utilize their machinery less in the earlier years. The

continued losses in the past years resulted in erosion of company's reserves and depletion of working capital base. This constricted liquidity continued to hamper the company's ability to operate at full capacity during the current year and cover all its fixed costs. Due to the replenishment of some working capital, the company has been able to boost this ratio in 2011. 3.5 Solvency Ratios: Debt to Equity Ratio: This ratio measures the amount of debt against the amount of equity. Higher debt indicates greater financial risk and weaker solvency. In the case of Kohinoor Mills, the company kept on relying on more and more debt as compared to their equity. The macroeconomic factors and some internal inefficiency proved to be very much lethal for them which made them heavily dependent on debt that was more than 100%. This is indeed an indication of extreme instability within the company. To meet their short term requirements, they kept on taking loans and defaulted on all major loans. To recover this alarming situation, debt restructuring strategy has been opted to repay maximum amount of loan. Debt-asset swap and injection of sponsor's loan through debt-asset swap is another strategy opted by the company which has lessened its debt to some extent in 2012. Financial Leverage Ratio: This ratio indicates the amount of total assets supported for one unit of equity. The ratio of Kohinoor Mills has been higher as compared to the industry average in 2010-2011 indicating that the company has been using debt to finance its assets. This is quite obvious from its debt to equity ratio as the company is over burdened in debt. However in 2012, the ratio has gone close to the industry average because of its less dependence on debt and overall reorganization of its major strategies. Interest Coverage Ratio: Interest coverage ratio indicates the number of times a companys EBIT could cover its interest payments. From 2010-2011, the ratio has been somewhat below the industry average as the company wasnt able to pay its major loans and the interests on them. So in the mid of 2011, they planned to come up with an effective strategy. And due to its implementation in

2012, the company has been able to improvise its EBIT resulting in a greater capacity to pay its interest payments. Valuation Ratios: Price Earnings Ratio: It indicates how much an investor pays per dollar of earnings. The ratio has been quite deteriorating for the shareholders of Kohinoor Mills mainly because of the fact that the company was in losses for some years due to their own mistakes. This greatly affected their share prices in the market and the earnings of their respective shareholders. In 2012, the company has tried to improve it and make it a positive figure through their increase in sales, and an effective strategy. Dividend payout and Retention Rate: In view of the current financial position of the company, it do not permit dividend payout. Therefore, directors regrettably decided to omit any dividends and bonuses for the last three years. EPS EPS is simply the amount of earnings attributable to each share of common stock. From 2010-2011, the EPS was very much below the industrial average and the shareholders of the company had to bear enormous losses due to the overall its alarming situation that was prominent in the market.In 2012, the company has made its way towards reacquiring its past worth of shares and its EPS is above average mainly due to the reasons discussed earlier.