Financial reporting analysis

m.com (weekend)

(Sir Ishtiaq)

Group Members:
Syed Mobeen Ali Naqvi
Usama Arshad
Maria Meherban
AZGARD NINE LTD
A. Profitability ratio: Profit is the surplus income in raw form it is the total revenue
minus total costs. It is mostly concentrated from the information of income
statement or profit and loss account. A set of profitability ratios is given below:
i. Net profit Margin:

NetProfit
Net Profit Margin=
Sales
−133,564
Net Profit Margin ( 2017 ) = =−0.01
12,802,374
196,623
Net Profit Margin ( 2018 ) = =0.012
15,971,672
305,312
Net Profit Margin ( 2019 )= =0.015
20,214,971
ii. Asset Turnover Ratio:
Sales
Asset turnover Ratio=
Average total Asset
12,802,374
Asset turnover Ratio ( 2017 ) = =0.684
18,689,987

15,971,672
Asse t turnover Ratio ( 2018 ) = =0.803
19,867,181
20,214,971
Asset turnover Ratio ( 2019 )= =0.891
22,686,486
iii. Return on Asset:
Net Income
Return on Asset Ratio=
Average Total Assts
−133,564
Returnon Asset Ratio(2017)= =−0.007
18,689,987
196,623
Return on Asset Ratio(2018)= =0.009
19,867,181
305,312
Return on Asset Ratio(2019)= =0.013
22,686,486
iv. Return on Equity:
Net Income
Return on Equity Ratio=
Average shareholde r ' s Equity
−133,564
Returnon Equity Ratio(2017)= =−0.586
227,606
196,623
Return on Equity Ratio (2018)= =0.458
428,735
305,312
Return on Equity Ratio(2019)= =0.287
1,063,554
v. Gross Profit Margin:
Gross profit
Gross profit Margin=
Sales
1,885,660
Gross profit Margin ( 2017 )= =0.147
12,802,374
2,580,312
Gross profit Margin(2018)= =0.161
15,971,672
3,488,280
Gross profit Margin(2019)= =0.172
20,214,971
 vi. Operating Return on Assets:
EBIT
Operating ROA =
Average total Assts
922,508
Operating ROA (2017)= =0.049
18,689,987
1,453,316
Operating ROA (2018)= =0.073
19,867,181
2,029,604
Operating ROA ( 2019 )= =0.089
22,686,486
vii. Return on Capital Employed:
EBIT
ROCE=
Capital Employeed
922,508
ROCE(2017)= =0.862
1,070,031
1,453,316
ROCE ( 2018 )= =1.252
1,160,574
2029604
ROCE ( 2019 )= =1.43
1414786
B. Liquidity Ratios:

i. Current Ratio:
Current Asset
Current Ratio=
Current Liabilities
5,268,016
Current Ratio ( 2017 ) = =0.298
17,619,956
6,382,833
Current Ratio ( 2018 ) = =0.362
17,619,956
9,008,089
Current Ratio ( 2019 )= =0.481
18,706,607

ii. Quick Ratio:

Cash+ Account Recievables+ Short Term Investments
Quick Ratio=
Current Liabilities
159,222+1,240,969+306,023
Quick Ratio ( 2017 )= =0.096
17,619,956
6,382,833+1,354,829+306,024
Quick Ratio ( 2018 ) = =0.429
18,706,607
9,008,089+3,217,170+306,023
Quick Ratio ( 2019 ) = =0.589
21,271,700
iii. Cash Ratio:
Cash∧cash equivalents
Cash Ratio=
Current Liabilities
159,222
Cash Ratio ( 2017 ) = =0.009
17,619,956
142,395
Cash Ratio ( 2018 )= =0.007
18,706,607
447,993
Cash Ratio ( 2019 )= =0.021
21,271,700
C. Activity Ratios:
i. Inventory turnover:
Sales
Inventory Turnover=
Inventory
12,802,374
Inventory Turnover ( 2017 )= =6.8
1,859,014
15,971,672
Inventory Turnover ( 2018 )= =6.4
2,468,070
20,214,971
Inventory Turnover ( 2019 )= =7.3
2,755,896
ii. No. of days Inventory:
365
Days∈inventory=
Inventory Turnover
365
Days∈inventory ( 2017 )= =54
6.8
365
Days∈inventory (2018)= =57
6.4
365
Days∈inventory (2019)= =50
7.3
iii. Receivables Turnover Ratio:
Net credit sal es
Account Recievable turnover=
Average Account Recieveable
63,8940
Account Recievable turnover(2017)= =0.51
1,240,969
113,860
Account Recievable turnover ( 2018 )= =0.08
1,354,829
1,862,341
Account Recievable turnover ( 2019 )= =0.57
3,217,170
iv. No. of Days Receivable:
365
No of Days=
Recieveable Turnover
365
No of Days (2017)= =715 DAYS
0.51
365
No of Days (2018)= =4563 DAYS
0.08
365
No of Days (2019)= =640 DAYS
0.57

v. Payables Turnover Ratio:

Total Supplier purchases
Accounts payableturnover =
Average Account Payable
10,916,714
Accounts payableturnover ( 2017 )= =7.118
1,533,520
13,391,360
Accounts payableturnover (2018)= =7.25
1,846,555
 16,726,691
Accounts payableturnover (2019)= =9.65
1,732,597
vi. No. of days payable:
365
No of days=
PayableTurno ver Ratio
365
No of days(2017)= =51.27
7.11872946
365
No of days( 2018)= =50.33
7.25207752
365
No of days(2019)= =37.80
9.65411518
vii. Working capital turnover:
Sales
capital turnover=
WorkingCapital(CURRENT ASSET −CURRENT LIABILITY )
12,802,374
capital turnover ( 2017 )= =−1.03
5,268,016−17,619,956
15,971,672
capital turnover ( 2018 ) = =−1.29
6,382,833−18,706,607
20,214,971
capital turnover (2019)= =−1.648
9,008,089−21,271,700

Ratio’s Chart

2017 2018 2019

Profitability ratio 1.139 2.768 2.897
Liquidity ratio 0.394 0.798 1.091
Activity ratio 13.34 12.44 15.87
Financial leverage 63.66 58.75 28.52

70

60

50

40 2017
2018
30 2019
20

10

0
Profitability Ratio Liquidity Ratio Activity Ratio Financial Leverage
 ANALYSIS OF FINANCIAL STATEMENTS

For the three months ended 30 September 2020, Azgard Nine Ltd. revenues increased
10% to PKR5.2B. Net income increased 67% to PKR219.1M. Revenues reflect an
increase in demand for the Company's products and services due to favorable market
conditions. Net income benefited from Interest/ mark-up on decrease of 3% to
PKR224.8M (expense),Administrative expenses decrease of 3% to
PKR138.1M(expense).

 Profitability: As there are several parts of profitability ratios so each one

of them depicts different things as Net profit margin shows the owners share left
in profit after deducting necessary expenses to make sales, taxes e.t.c.
Therefore in 2017 there is a negative figure means there is nothing left for
owners of the company in the current year however, in 2018 the ratio is 0.012
which means there is a little amount left for owners and same in 2019. The sales
which are being generated by the company in 2017 are 0.684 which depicts that
company if utilizes its assets in an effective way they can generate sales this
much times whereas in 2018 and 2019 it becomes 0.803 and 0.891 respectively.
If company sells all its assets the earnings ratio in 2017 will be negative mean
they were not in a good position but if we compare it with 2018 and 2019 it would
change and would be 0.009 and 0.013. However keeping the profitability ratio as
a whole in view it shows an increasing trend that the company is increasing its
profitability to increase its net worth and also shows that its owners are earning
better than before.

 Liquidity Ratio: Liquidity refers mainly to companies day to day expense

fulfilling capacity this includes Current, Quick and Cash ratios. Current ratio
shows an increasing trend from FY17 to FY19, whereas quick ratio shows
whether a company possesses enough short term assets to fulfill its short term
liabilities because quick ratio is also increasing which depicts that company is
increasing its current assets to payoff current liabilities. Whereas the company’s
ability to paying off its liabilities by cash has decreased in 2018 from 2017 but it
has increased in 2019 again even more than 2017. But overall companies
liquidity has drastically increased which shows that now company has more cash
or current assets to pay off its short term or current liabilities.

 Activity Ratio: Activity ratios help to assess the level of productivity in

business cycle of an enterprise. The inventory turnover has fluctuated which has
dropped in 2018 but then increased in 2019 however, the No. of days of
inventory turnover has also fluctuated which has increased from 54 to 57 and
then coming back to 50 respectively. If we look at our receivable ratio we are not
much satisfied with it but looking at our payable ratio its quite satisfying from
2017 to 2019 which means that we are paying off our liabilities before than
receiving our amount from creditors. But if we compare activity ratio as a whole
the amount that has dropped in 2018 from 2017 means that companies activities
 were on a decline but then the company recovered and even better than its
initial.

 Financial Leverage: Financial leverage describes the share of the capital

injected in an enterprise with reference to the amount of the total assets. Keeping
azgard Nine in view the financial leverage is at decreasing trend which shows
that on average the total assets are decreasing while the owner’s equity is
increasing on average which shows that the company is going towards dilusion
of ownership.