SUPERIOR UNIVERSITY

Corporate Finance
 VISION STATEMENT
A modern dynamic industrial unit, which is a true model of socially
responsible and professionally managed successful business enterprise

MISSION STATEMENT

Ghazi fabrics international limited. , strives to excel in the global

competitive environment as the most progressive and quality- oriented
company in terms of industry benchmarks, profitability and stake holders
interest.

To realize our mission, we firmly believe in continuous process of

balancing, modernizing and replacement of our technology ‘. Commitment
in developing innovative products, services and human resources, and the
better of all those involved directly or indirectly with the company
 Ratio Analysis of Ghazi Fabrics

1- Current Ratio = Current Assets / Current Liabilities

The current ratio measures the ability of the firm to pay is current bills
while still allowing for a safety margin above their required amount needed
to pay current obligations.

2008 2007 2006

Current
=792,844/1,159,516 =581,531/710,669 =503,534/514,726
Ratio
0.68 : 1 0.81 : 1 0.98 : 1

Analysis
Current ratio in 2007 is 0.81 but it decreased in 2008, 0.68. One
reason is decrease in current assets in 2008, or current liabilities are increase.
In case of 2006 the current ratio is .98 and decreased in 2007 .81. The
current asset is decrease or current liabilities are increase. In 2006 to 2009 it
is continuous decrease.

2- Quick Ratio= Current asset-inventory/current liabilities

The quick ratio is similar to the current ratio but eliminates the
inventory figure in the current assets section of the balance sheet. Generally,
the quick ratio should be lower than the current ratio because it eliminates
the inventory figure from the calculation.

2008 2007 2006

=792,844-450,610 =581,531-359,710 =503,534-390,214
Asset test ratio /1,159,516 /710,669 /514,726
0.29 : 1 0.31 : 1 0.022 : 1

Analysis
Quick ratio in 2007 is 0.31 but it decreased in 2008, 0.29. One reason
is increase in current liabilities or current asset is decrease or inventory is
increased. In this the company liquidity is not good.

3- Inventory Turnover Ratio = C.G.S / Average Inventory

The inventory turnover ratio measures the number of times during a year
that a company replaces its inventory.

Inventory 2008 2007 2006

Turnover =2,828,777/450,610 =2,709,747/359,710 =2,236,963/390,214
Ratio 6.28 7.53 5.73

Analysis
There is a decrease in stock turnover ratio from 7.53 times in 2007
and 6.28 times in 2008. C.G.S is increased in 2008.

4- Average Collection Period= Account receivable/average sale

per day

Average 2008 2007 2006

Collection =82,845/7750 =75,942/7424 =61,402/6129
Period 10.69 Days 10.22 Days 10.01 Days
Analysis
There is a slight increase in average collection period from 10.69
Days in 2008 and 10.22 Days in 2007. Credit sales increase and cash inflow
decreases. It is continuous increase in 2006 to 2009

5- Average Payment Period = (Account Payable / Total Credit

Purchase)

The accounts payable turnover ratio includes all outstanding obligations that
a company owes its creditors

Average 2008 2007 2006

Payment =92750/7420 =90540/7351 =86410/6490
Period 12.5 Days 12.32 Days 13.31 Days

Analysis
There is a slight increase in average payment period from 12.5 Days
in 2008 and 12.32 Days in 2007. Credit purchase is also increase.

6-Total Asset Turnover = Sales / Total assets

The total asset turnover is a measure of how efficiently and effectively a

company uses its assets to generate sales.
Total 2008 2007 2006
Asset =2,894,539/2,443,279 =2,758,729/2,302,490 =2,423,485/2,339,867
Turnover 1.18 1.19 1.03

Analysis
 There is a decrease in asset turn over ratio from 1.18 times to 1.19
times. That’s mean our fixed assets capacity is decreased in 2008 to generate
the sales efficiently.

7-Total Debt Ratio = Total Liabilities / Total Assets

Debt ratios measure the total amount and proportion of debt within the
liabilities section of a firm’s balance sheet. These figures are normally
appropriate for comparing a company performance from one period to
another.

Total 2008 2007 2006

Debt =1,159,516/2,443,279 =710,669/2,302,490 =514,726/2,339,867
Ratio 0.47 0.31 0.22

Analysis
Current ratio in 2007 is 0.31 but it increased in 2008, 0.47. One reason
is increase in total liabilities in 2008. Although total asset are also increased
but total liabilities increase in more proportion as compared to total assets.

8-Gross Profit Margin = Gross Profit / Sale *100

The profitability measure the ability of the business firm to earn a profit
from its operations through assets, sales, and equity.

Gross 2008 2007 2006

Profit =65,762/2,894,539 =48,982/2,758,729 =186,522/2,423,485
Margin 2.27% 1.77% 7.70%

Analysis
GP Ratio is increased from 1.77% to 2.27%, sales are increased in
more proportion in 2008 as compared to cost of goods sold.

9- Operating Profit Margin = Operation Profit / Sale *100

The operating profit margin indicates the profits of the company before
interest and taxes are deducted from firms operations. The higher the
operating profit margin, the greater pricing flexibility a firm has in its
operations.
Operating 2008 2007 2006
profit =44,962/2,894,539 =54,524/2,758,729 =80,087/2,423,485
Margin 1.55% 1.97% 3.30%

Analysis
There is a decrease in operating profit ratio from 1.97% to 1.55% in
2008.There is an increase in salaries, wages and sales promotions and
advertisements.

10-Earning per Share = Earning after tax/ Total number of share

Earning 2008 2007 2006

per =184,251/400,000 =183,249/400,000 =160,000/400,000
 share 0.46 0.45 0.40

Analysis
Earning per share is increased from 0.45 to 0.46. Company is keeping
no reserves. All profit is available for share holders. Earning per share
increased by improved profits.

11-Return on total asset = Earning after tax/ Total asset

Earning 2008 2007 2006

on total =184,251/2,443,279 =183,249/2,302,490 =160,000/2,339,867
asset 0.075 0.079 0.068

Analysis

Return on total asset is decreased from .079 to 0.075. The company loss is
also increase. It shows how well a company uses its assets to generate
profits.

Here it shows that company is using its assets less efficiently in 2008 as
compared to 2007

12-Return on Equity = NAIT/ Total share holder equity

Return 2008 2007 2006

on =67,830/711,930 =102,722/664,989 =80,486/557,291
Equity 9.5% 15.4% 14.4%

Analysis
 Return on equity is decreased from 15.4 % to 9.5 %. The company
loss is also increase. Capital and reserve are also decrease.

13-Pricing earning ratio = MPPS of Common Stock/ EPS Ratio

Pricing 2008 2007 2006

earning =2.5/(5.65) =3.0/(5.62) =3.5/(5.70)
ratio -0.44 -0.53 -0.61

Analysis
Pricing earning ratio is decreased from 5.43 to 6.67. Its show that, the
market, earning share are also decrease. it shows how much investor would
invest to earn.

14-Market Book Ratio = MPPS of Common Stock/ BVPS of common

Stock
Market 2008 2007 2006
book =2.5/10 =3.0/10 =3.5/10
ratio 0.25 0.30 0.35

Analysis
Market Book ratio is decreased from 0.30 to 0.25. This ratio shows
how much market value of entity share has decreased.
 Review
From Investor’s Point of view:
We have increased Gross Profit Ratio
and NP Ratio. Company’s business is expanding because sales are
increasing and company’s other operating expenses are decreasing. Loss per
share is also decreased and profits will available for share holders in future.
Return on capital is also increased, above all signs are positive for
investment.

From Lender’s Point of View

Company has good liquidity position.
We have increased current ratio but liquid ratio is showing decreasing trend.
Finally we hope that Company’s financial will improve in future.