ANALYSIS OF FINANCIAL

STATEMENTS PROJECT
GUL AHMAD Textile Mills

BY : Ahmad Ali
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Analysis of Financial Statements Project Report

“Gul Ahmad Textiles Mills”

SUBMITTED BY: Ahmad Ali

Class: BBA 6th B

Registration no: 04151713016

Subject: Analysis of financial statements

SUBMITTED T0: Dr. Ibrahim Khan

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TABLE OF CONTENTS:

 Name of Company
 Owner of The Company
 Company’s Ownership Structure
 Directors of the Company
 Brief History of the Company
 Incorporation Date
 Listing Date
 Principal Lines of Business and Major Competitors
 Market Price Share
 Total Capitalization
 Day of Fiscal Year-End
 Depreciation Method
 Inventory Method
 Average Income Tax Rate of Fiscal Year
 Executive Summary of the Company
 Strengths and Weakness of the Company
 Recommendations
 Ratio Analysis
 Graphs
 Interpretation
 Appendix
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Company Name: “Gul Ahmad Textile Mills”

Introduction:

The Gul Ahmed Group began trading in textiles in the early 20th century. In 1953, the group
decided to enter the field of manufacturing under the name Gul Ahmed Textile Mills Limited
and was incorporated as a private limited company. Gul Ahmed Textile Mills Limited is a
publicly-held enterprise providing a wide range of textile products primarily in Pakistan and
having a very large export base. It was listed on the Karachi Stock Exchange in 1972. Since then,
the company has made rapid progress and is currently one of the leading composite textile
houses in the world. More than 50 years since its inception, the name Gul Ahmed is still globally
synonymous with quality, innovation & reliability.

The Group today has grown into a conglomerate and includes Gul Ahmed Textile Mills, Gul
Ahmed Energy, and Habib Metropolitan Bank. More recently, a chain of retail outlets has been
founded under the name "Ideas by Gul Ahmed". A mill is presently a composite unit with an
installed capacity of 130,000 spindles, 250 wide width air jet looms, 90 Sulzer’s, 297
conventional looms, and a state-of-the-art processing and finishing unit. Gul Ahmed has its
captive power plant comprising of gas engines, gas & steam turbines, and backup diesel engines.
Believing in playing its role in protecting the environment, Gul Ahmed has also set up a
wastewater treatment plant to treat 100% of its effluent, bringing it to NEQS levels.

Owner of the company:

Mr. Muhammed Bashir
Chairman
Mr. Mohomed Bashir joined the Board of Gul Ahmed Textile Mills Limited in 1982. He is a
fellow member of the Chartered Institute of Management Accountants (CIMA), United
Kingdom.

Company ownership structure:

Gul Ahmed Textile Mills Limited is a subsidiary of Gul Ahmed Holdings (Private) Limited
(GAHPL), which owns 67.10% shares.

The Company has the following six wholly-owned subsidiaries which are engaged in trading of
textile-related products:
1. Gul Ahmed International Limited (FZC) incorporated in UAE on December 11, 2002.
2. GTM (Europe) Limited incorporated in the United Kingdom (UK) on April 17, 2003, is a
wholly-owned subsidiary of Gul Ahmed International Limited (FZC).
3. GTM USA Corp. and Sky Home Corp., both incorporated in the United States of America
(USA) and JCCO 406 Limited incorporated in the United Kingdom are wholly owned
subsidiaries of GTM (Europe) Limited. Whereas Vanstone Home Limited is a 100% subsidiary
of JCCO 406 Limited, UK.
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Processing, Home, Textile, and Apparel 36,742 62.1%

Retail and Distribution 20,539 34.7%

Spinning 10,989 18.6%

Weaving 2,339 4%
Sky Home Corporation 1,183 2%
Gul Ahmed International Limited (FZC) - UAE 523.73 0.9%

GTM (Europe) Limited - United Kingdom 433.85 0.7%

GTM United States Corp. 65.44 0.1%

Board of Directors:

Mohomed Bashir -Chairman

Zain Bashir- Vice Chairman/ Executive Director

Muhammad Zaki Bashir-- Chief Executive Officer

Ziad Bashir - Non-Executive Director

S.M. Nadim Shafiullah - Non-Executive Director

Dr. Amjad Waheed- Independent Director

Ehsan A. Malik- Independent Director

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Brief History of the Company:

The Gul Ahmed Group began trading in textiles in the early 20th century. In 1953, the group
decided to enter the field of manufacturing under the name Gul Ahmed Textile Mills Limited
and was incorporated as a private limited company. Gul Ahmed Textile Mills Limited is a
publicly-held enterprise providing a wide range of textile products primarily in Pakistan and
having a very large export base. It was listed on the Karachi Stock Exchange in 1972. Since then,
the company has made rapid progress and is currently one of the leading composite textile
houses in the world. More than 50 years since its inception, the name Gul Ahmed is still globally
synonymous with quality, innovation & reliability.
The Group today has grown into a conglomerate and includes Gul Ahmed Textile Mills, Gul
Ahmed Energy, and Habib Metropolitan Bank. More recently, a chain of retail outlets has been
founded under the name "Ideas by Gul Ahmed". A mill is presently a composite unit with an
installed capacity of 130,000 spindles, 250 wide width air jet looms, 90 Sulzers, 297
conventional looms, and a state-of-the-art processing and finishing unit. Gul Ahmed has its
captive power plant comprising of gas engines, gas & steam turbines, and backup diesel engines.
Believing in playing its role in protecting the environment, Gul Ahmed has also set up a
wastewater treatment plant to treat 100% of its effluent, bringing it to NEQS levels.

Incorporation Date:

The Company was incorporated on April 1, 1953, in Pakistan as a private company with its
liability limited by shares. The Company was converted into a public limited company on
January 07, 1955, and got listed on the Karachi Stock Exchange (KSE). The Company is listed
on Pakistan Stock Exchange Limited.

Listing Date :
1970
In 1953, the group decided to enter the field of manufacturing under the name Gul Ahmed
Textile Mills Limited and was incorporated as a private limited company. In 1970, it
was listed on the Karachi Stock Exchange and was one of the leading composite textile houses
in Pakistan.
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Principal Lines of Business and Major Competitors:

At Gul Ahmed, we focus on delivering high-quality products to our customers. Customers’
satisfaction is our key objective. We have taken the following measures regarding product
quality and consumer protection:
• Quality control checks at different stages of the process of production and final quality check at
the time of packing;
• Damaged or broken products are replaced;
• Environment friendly and quality packing;
• Free product exchange service;
• Customer-friendly and hygienic environment;
• Product safety guidelines for washable products to enhance their life.
Product Portfolio:
The production of textiles is a mix of technical expertise and the creative art required to make
products acceptable to valued customers. At Gul Ahmed, efforts are made to strive and grow
through learning, continuous improvement, and innovation. Gul Ahmed is also equipped with the
most advanced technology that enables it to cater to a vast spectrum of product varieties.

Yarn:
Yarn produced by Gul Ahmed is exported to a host of countries around the globe. Gul Ahmed
exports its yarn to different regions including China, other Asian, Middle East countries, and
Europe. Gul Ahmed manufactures different qualities of yarn which include carded, combed,
compact Siro, fancy, plied, core-spun, slob, package dyed/cone dyed, gassed mercerized/dyed
yarn.
Fabric:
Gul Ahmed has the facility to dye and print the whole range of home textile and apparel fabrics.
Also, we have the set-up for back coating and flock printing which gives us an added opportunity
to serve the needs of our customers. Our products under the fabric category are plain fabric,
sheeting fabric, poplin, canvas, oxford, duck, Bedford cord, herringbone, ottoman, twill, sateen,
rib stops, slub fabric, stretch fabric and mélange fabric.

Made-ups:
Gul Ahmed’s fine textile products represent a unique fusion of the centuries-old traditions of the
east and the latest textile technology of the west. The made-ups can be in white, dyed, printed, or
yarn-dyed form and different styles of confectioning. Our made-ups section comprises:
• Home Textiles :
Home textile products furnish all home and office decoration needs and are designed to set new
trends and fashion vibes.
This section includes:
• Sheets and Pillowcases
• Comforters
• Quilt/Duvet covers
• Bed-in-a-Bag
• Decorative pillows
• Curtains
• Upholstery fabrics
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Apparel and Garments:

We have always kept alive the passion of creative designers and invited young talent to express
their talent in various forms of design. This is how the Company encourages them and also
benefits from their ideas. Our value creation process and our human resource have never let us
down. The passion of our customers to rush to the stores on every new launch is a testament to
our success in creating appealing designs and new fashion trends. Getting an impressive response
from the local market, we have now gone for the export of garments. Designing products
according to the fashion flow of the target countries and the GSP Plus status have helped us
increase our exports.

Competitor Profile:

 Al Karam Towel Industries:

Al Karam Towel Industries has reason to claim it is second to none in the industry. As an
Award-Winning and Internationally Certified manufacturer of quality towels, Al Karam offers
affordable luxury. With decades of experience and expansion based on "Organic Growth", Alka
ram with its vertically integrated mill feeding to an output level of 5000 containers/annum, is
confident in supplying in a quality-conscious environment, able to leverage raw material costs, a
generous and diverse inventory of products. Al Karam Towel ensures success to its buying
partners, in optimizing their sourcing costs and attaining the product quality they deserve. Once
orders are shipped, the customer service team ensures delivery and satisfaction.

Its product portfolio in home textiles comprises of:

 Hand, Bath, and Shower towels
 Kitchen and Dishtowels
 Tea Towels
 Hooded Towels
 Embroidered Towel Sets
 Wash Cloths
 Golf Towels
 Personalized Towels
 Monogrammed Towels
 Nishat Mills Ltd.

Nishat is a renowned business leader and one of the most successful and diversified leading
groups in Pakistan. Its exceptional services include unbeaten textile manufacturing, winning
cement industry, and trustworthy banking. Its extraordinary performance is the resulting
combination of excellent HR, financial body, and supreme dedication along with the
incomparable focus on quality, productivity, and reliability. Nishat Mills Limited, the flagship
company of Nishat group is the largest composite textile set up in Pakistan, with an annual
turnover of US $550 million and an ISO 9001 certification. Nishat is capable of producing
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approximately 9 million meters of processed fabric per month. The product range includes
bedding ensembles, window treatments, kitchen articles, and living room textiles with high and
low thread count fabrics. The company has a dynamic research team taking advantage of the
vertically integrated setup and keeps on creating new product ideas in home textile and fashion
collections.

 Nishat Chunian Ltd

. Being a vertically integrated unit, Nishat Chunian Limited is one of the largest textile
companies in Pakistan with a monthly production of 8.5 million lbs. of yarn, 3 million yards of
fabric, and 4 million yards of dyeing and state-of-the-art printing capacity with complementing
stitching output. Nishat Chunian Limited has had key placements at leading global retailers with
a diverse product range that includes bed linen, top-of-bed products, and window curtains. Nishat
Chunian Limited is known for its dedicated Research & Development efforts to bring out
ground-breaking product ideas in the market. Over the years, it has developed various exclusive
products for different markets utilizing a wide variety of finishes, fibers, and blends. In addition
to fabric processing, it also specializes in diverse and unique sewing techniques.

 Lucky Tex Pakistan (Pvt) Ltd.

One of Pakistan's leading home textile producers, Lucky Tax has state-of-the-art technology and
equipment that permits it to supply the world's leading retailers or wholesalers directly. Its
growth is based upon a total commitment towards developing close customer relationships built
upon reliable performance that both retailers and wholesalers need to grow their business. 
Chenab One Textiles Chenab One is a Punjab based home text producer that is a direct
competitor. It is catering to the local market through its retail outlets by the name of Chen One. It
is now also a leading producer of premium bed linen, curtains, bath accessories, kitchen
accessories, decoration accessories, men, women, and children’s apparel. The company is also
largely an exporter to the same countries as Gul Ahmed.

 A froze Textiles A froze

Textiles is a prominent home textile exporter manufacturing bed linen, made-ups, towels, bath
curtains, and bath accessories for the private labels for Wal Mart and other large US and
European retailers. Such orders have been outsourced to the company which also sells its home
textiles in the local industry through its retail outlet Bed & Bath. It has recently entered the
fashion lawn fabric sector with its Hira Lari brand. This is also a private limited company with a
similar managerial culture and set up.

 Al Abid Textile Mills

Al-Abid has developed into a powerful competitor in the field of Home Textiles since the
company was incorporated in 1968. Al-Abid continuously strives to develop market-leading
merchandise focusing on its strengths, working with state of the art plant & machinery,
developing value-added products for customers with a "passionate attitude for excellence". Its
core business has been the design and manufacturing of Home Textiles. The company has
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positioned itself using state-of-the-art technology to support its dyeing & printing capabilities
which make it well-equipped to tailor itself to customers' requirements. It has allocated specific
capacity to work on specialized bedding, using skilled human resource skills to work on
embellished products. This set up provides the edge to maintain high quality which ascertains the
high value of the final product. 16 Khagan M. et al. / Journal of Marketing Management.

 Integrated Textiles Integrated Textiles,

caters to the outsourcing needs of global partners in home textiles in Pakistan and Bangladesh.
Its strength and synergy lie in design, sourcing & manufacturing. It produces fine woven and
knitted greige, white, dyed, printed & denim fabrics. It has a system of global sourcing and
manufacturing, merchandising, quality assurance & online order tracking. It offers rich bedding,
bath, windows, garments, hospitality &lifestyle.

 Kam International Kam International

is a vertically integrated textile mill possessing processes like ginning, spinning, weaving,
processing (rotary, flatbed, continuous dyeing), and stitching located in the port city Karachi.
With a current annual production capacity of 45 Million meters and strong financial acumen,
Kam continues to prove itself as a low cost, large scale, quality production mill providing
turnkey solutions to its clients in the US and other regions.

 United Towel Exporters

United Towel Exporters is a family-owned company that specializes in the manufacturing and
export of terry towels, bathrobes, bed linen, and workwear. Established in 1982 with just two
looms, it now runs more than 800 terry towels and flat linen looms.UTE is a one-stop-shop for
its customers as it offers a diverse range of items catering to the Home, Food and Beverage
Industries, Hospitality, and Healthcare. UTE continuously strives to update its facilities to meet
changing customer demands. The UTE complex stretches over an area of 600,000 sqft in the
industrial zone, located in Karachi. It caters to prestigious retailers, laundries, hotels, and
institutions in more than 20 countries around the globe.

Market Price Share :

Rs. 28.33-0.12 (-0.42%)

Volume: 202,000

Market Cap: 12.12 bn

Avg Volume (12M): 704,4

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Total Capitalization: 12.12 bn

Day of Fiscal Year End: 30th June

Depreciation Method: Depreciation is charged on all depreciable assets using

reducing balance method except for structure on leasehold land / rented property and
specific office equipment (i.e. I.T. equipment and mobile phones) and turbines in plant
and machinery, which are depreciated at straight-line method. These assets are
depreciated at rates specified in note No. 14.1 Depreciation is charged on additions on
monthly basis i.e. from the month in which it is capitalized till the month before the
month of its derecognition. Depreciation is charged on the assets even if the assets are
idle. No amortization is provided on leasehold land since the leases are renewable at the
option of the lessee at nominal cost and their realizable values are expected to be higher
than respective carrying values.

Inventory Method:
Stores and spare parts, except goods-in-transit, are stated at moving average
cost less provision for slow-moving /obsolete items cost of goods-in-transit
includes invoice/purchase amount plus other costs incurred thereon up to
reporting date.

Average Income Tax Rate of Fiscal Year: Average income tax rate for
the fiscal year 39%.
Provision for current tax is based on the taxable income for the year determined by the
prevailing law for taxation of income. The charge for current tax is calculated using
prevailing tax rates or tax rates expected to apply to the profit for the year. The charge
for current tax also includes the impact of available tax credits and adjustments, where
considered necessary, to provision for taxation made in previous years arising from
assessments framed during the year for such years.
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Executive Summary of the Company :

The story of textiles in the subcontinent is the story of Gul Ahmed. The group began trading in
textiles in the early 1900s. The group entered in the field of manufacturing with the
establishment of today’s iconic name of Gul Ahmed Textile Mills Ltd in the year 1953. Since its
listing on the Karachi Stock Exchange in 1970, the company has been making rapid progress and
enjoying a leading position in the world of textiles.
With an installed capacity of more than 51,840 spindles, 300 state-of-the-art weaving
machines, and most modern yarn dyeing, processing & stitching units, Gul Ahmed is a
composite unit – making everything from cotton yarn to finished products. Gul Ahmed has its
captive power plant comprising of gas engines, gas & steam turbines, and backup diesel
engines. Believing in playing its role in protecting the environment, Gul Ahmed has also set up a
wastewater treatment plant to treat 100% of its effluent, bringing it to NEQS levels.
Gul Ahmed is playing a vital role not only as a textile giant but has its strong presence in the
retail business as well. The opening of its flagship store – Ideas by Gul Ahmed– marked the
group’s entry into the retail business. Starting from Karachi, Gul Ahmed now has an extensive
chain of more than 40 retail stores across the country, offering a diverse range of products from
home accessories to fashion clothing. More than 50 years since its inception, the name Gul
Ahmed is still globally synonymous with quality, innovation & reliability.

Strengths and Weakness of the Company:

SWOT Analysis :

Gul Ahmed Strengths:

Gul Ahmed enjoys a strong brand equity and reputation as the market leader. It has consistently
increased its organic sales. It has been awarded leading exporter to France in home textiles and
always represents Pakistan as a prominent exporter in trade fairs and exhibitions. The company
is vertically integrated has a strong presence across the value chain as it has bargaining power
over the suppliers. Also, it has a large production capacity and is a large composite unit to beat
reliance on any other. To overcome the erratic power supply it has set up its power generation
unit. Gul Ahmed has a huge diversified portfolio in home textiles, fashion, apparel, and
accessories. It has strong operating performance viz-a-viz peers. It has heavily invested in
automation and R&D to make home textile products according to international requirements and
standards. The company produces the superlative quality of cotton yarn and exports it along with
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other value-added products. Gul Ahmed is technologically sophisticated and innovative in its
designs. Its influential strength has saved its production facilities from facing gas curtailment on
which its power generation system depends. Future shortages, however, will affect its production
schedule. Therefore, for saving on the cost of production, the plant is running on a continuous
production basis to fulfill demand. It has a strong distribution system, using selective distribution
and its Ideas retail outlets for showcasing its home textile made-ups, clothing, and other
accessories.

Weaknesses:

Gul Ahmed is a sprawling textile conglomerate but is not without its fair share of weaknesses. It
has exhibited over-reliance on the processing segment. While the company is financially strong it
has not maintained its liquidity position very well. The company has a typical management
hierarchy that is characteristic of a ‘Seth’ culture.

Opportunities:

A positive outlook on the textile industry is stated in Pakistan’s Textile Policy 2009-
2014favoring growth of the home textile sector. The global economy is recovering after the
recession following 2008-9. The demand for cotton yarn and fabric from China is growing
exponentially industry seems prepared for consolidation with the phasing out of small producers
due to electricity shortfall and rising input cost differential. The firm can also enter into joint
ventures with foreign apparel makers or home textile retailers/wholesalers.

Threats:

Anti-dumping duties and EU tariffs drove down demand for Gul Ahmed home textile products
abroad. Also, the conditional GSP (Generalized System of Preferences) status levies too many
prerequisites, meeting which is challenging. The recent grant of MFN status to India has put the
local industry at risk as India and Bangladesh are already outperforming Pakistani producers.
High-interest rates discourage investment in Pakistan. The foreign exchange risks, electricity
shortfall, high electricity tariffs and strong direct competitors like Al Karam, Nishat, and Lucky
Textile being the major competitors pose major threats to Gul Ahmed. The volatile raw material
prices leading to high input cost differential make it difficult for the company to compete on
price. The company has been forced to make up for the decline in sales volumes in the retail
margins. Political instability has also shaken investor confidence in the home textile sector which
is both capital and labor-intensive
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Recommendations:

Although we are very immature to provide genuine recommendations for the Gul Ahmed but after
spending our last few days in the analysis of the report we have come across some main points which
can be beneficial for them.

1. The government should devise two-dimensional strategies. Well which is already recommended
no. of times by analyst i.e. Gul Ahmed should be able to capacity building by reducing the cost of
finance for long term investments in value-added projects and reduction in cost like

a. Reducing financial cost for working capital

b. Reducing the cost of utilities i.e. gas, electricity, etc

2. On the other hand i.e. that at the international front it should intensify its diplomatic efforts for
having equal access in markets like the US, EU, etc. as compared to imports from other regional
countries.

3. The most important point is that in this modern era of competition Gul Ahmad and the textile
industry would not be able to survive by working in traditional ways. They have to set up vertical
units, reduce their cost by gaining economies of scale in production which can ultimately save
them in the long run. Ultimately the Gul Ahmad has to be proactive rather than solely waiting for
government assistance.

Gul Ahmed Textile Mills Limited

FINANCIAL STATEMENT
2015-
2019

Equity and Liabilities 2015 2016 2017 2018 201

unappropriated profit 746,279 N/A N/A
Share capital 2,285,228 2,970,796 3,564,955 3,564,955 3,564,
11,768
Reserves 4,350,852 6,010,215 7,348,962 9,055,772 8
12,620,72 15,333
Share Capital and Reserves 7,382,359 8,981,011 10,913,917 7 3

Long term financing 2,407,732 4,630,604 7,146,403 6,911,869 8,856,

Deferred Liabilities
Deferred taxation 356,354 323,908 298,358 23,692 71,3
Defined benefit plan-Staff Gratuity 48,833 41,346 23,864 63,165 86,7
Non-Current Liabilities 2,812,919 4,995,858 7,468,625 6,998,726 9,014,
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Trade and other payables 5,393,287 5,377,637 5,569,167 7,008,948 9,637,

Accrued mark-up/profit 206,481 114,368 138,898 175,633 300,0
12,866,49 15,076,08 18,961
Short term borrowings 8,838,174 3 11,935,343 1 2
Current maturity of long term
financing 714,008 487,400 678,511 1,365,857 1,180,
Unclaimed dividend N/A N/A 5,169 6,421 8,26
Unpaid Dividend N/A N/A 9,042 11,052 16,0
15,151,95 18,845,89 23,643,99 30,104
Current Liabilities 0 8 18,336,130 2 6

25,347,22 32,822,76 43,263,44 54,452

TOTAL Eequity and Liabilities 8 7 36,718,672 5 7

Assets 2015 2016 2017 2018 201

12,069,60 16,104,31 18,994
Property, plant and equipment 9,049,142 8 15,969,191 9 5
Intangible assets 15,834 20,492 33,747 23,985 44,6
Long term investment N/A 21,820 58,450 58,450 58,4
Long term loans and advances 12,859 158,136 40,092 37,314 63,3
192,629 16,427,027
Long term deposits 93,572 996 16,294,109 202,959 369,7
12,271,05 16,427,02 19,530
Non-Current Assets 9,171,407 2 16,294,109 7 6

Stores and spares 699,062 903,447 988,216 961,088 1,469,

11,461,19 14,057,20 16,143,93 21,369
Stock-in-trade 8 2 12,469,962 3 2
Trade debts 2,152,073 2,786,782 3,345,046 5,398,565 7,071,
Loans, advances and other
receivables 349,247 729,911 841,292 1,197,376 1,750,
Short term prepayment 114,964 227,788 196,718 239,661 303,7
Refunds due from Government 331,399 475,709 1,639,746 1,827,764 1,487,
Taxation-net 750,196 913,960 673,701 597,781 977,9
Cash and bank balances 181,730 117,249 269,882 470,250 491,9
Other receivables 135,952 339,666 N/A N/A N/A
16,175,82 20,551,71 26,836,41 34,921
Current Assets 1 4 20,424,563 8 1

25,347,22 32,822,76 43,263,44 54,452

Total Assets 8 6 36,718,672 5 7
           
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15,476,75 19,648,26 25,875,33 33,452

current assets-inventory 9 7 19,436,347 0 7
11,245,90 17,497,09 21,987,95 27,818
total debt 6 7 19,081,746 0 3
receivables 485,199 1,069,577

INCOME
STATEMENT
2015-
2019

      2015 2016 2017 2018

33,187,67 40,065,60 46,570,31

Sales - net 34,217,319 6 5 8 59
25,521,66 32,858,31 36,685,08
Cost of sales 27,787,984 8 2 1 46
Gross profit 6,429,335 7666008 7,207,293 9,885,237 12

Distribution costs 2,644,798 3,285,630 3,483,858 4,052,193 4

Administrative costs 1,790,118 2,096,296 2,304,764 2,687,136 3
Other operating costs 185,397 137,554 58,377 208,043 3
4,620,313 5,519,480 5,846,999 6,947,372 8
1,809,022 2,146,528 1,360,294 2,937,865 4

Other income 343,095 154,673 326,055 473,436 1

Operating profit 2,152,117 2,301,201 1,686,349 3,411,301 5
Finance cost 1,360,449 915,843 877,587 989,613 1
Profit before taxation 791,668 1,385,358 808,762 2,421,688 4
Taxation 177,399 203,119 9,660 261,307 4
Profit after taxation 614,269 1,182,239 799,102 2,160,381 3

Earnings per share - basic and diluted

(Rs.) 2.69 4.43 2.5 6
             
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Ratios Analysis:

RATIO ANALYSIS
2015 2016 2017 2018 2019
Liquidity Ratios
1.113897
Current ratio 1.06757355 1.090513914 2 1.1350206 1.1600338
1.060002 1.1112176
Quick(acid-test)ratio 1.02143678 1.04257526 7 1.0943723 4

Leverage ratios
1.748386 1.7422094 1.8142826
Debt-to equity 1.52334857 1.948232443 6 6 9
0.519674 0.5082339
Debt-total-assets 0.443674 0.533078078 2 1 0.5108844

Profitability Ratio
0.019944 0.0463896 0.0613322
Net profit margin % 0.01795199 0.035622832 8 6 1
0.021762 0.0499354 0.0666682
Return on investment % 0.02423417 0.036018872 8 8 3
0.073218 0.1711772 0.2367561
Return on equity % 0.08320768 0.13163763 6 2 2
0.179887 0.2122647 0.2155451
gross profit margin % 0.1878971 0.2309896 3 5 3
0.042089 0.0732505 0.0934819
operation profit margin 0.06289555 0.069339022 7 4 3

Activity Ratio
1.091150 1.0764357 1.0870018
total assets turnover 1.34994324 1.011117588 7 3 9
inventory turnover 39.7503855 28.2492144 33.25013 38.170366 31.595501
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2 3 1
9.5623918 11.552277
inventory turnover in days 9.18230088 12.92071329 10.9774 6 6
4.5086631 4.0397734
receivable turnover 4.43544401 2.605499183 3.976082 1 7
91.79891 80.955261 90.351600
receivable turnover in days 82.2916486 140.0883187 1 3 8

1.921574 3.4471060 3.6822724

coverage ratio 1.58191671 2.512658829 7 9 4
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Ratio’s Graphs:
Liquidity Ratios:

CURRENT RATIO: The current ratio specifies the extent to which current liabilities are
covered by those assets expected to be converted to cash shortly. The current ratio formula is
FORMULA: Current ratio= current assets/current liabilities

1.18

1.16

1.14

1.12

1.1

1.08

1.06

1.04

1.02
Current ratio

Interpretation: Current Ratio is an indicator of the capability of the firms to pay their current
liabilities by converting current assets. It is also is known as the liquidity ratio. Generally, more
than one ratio is acceptable. Efficient fund management has helped in steady growth in the
current ratio. The current ratio was recorded in 2015 by the company is 1.06 that gradually
decreases when the years are past, and then increases in 2018 by 1.16 which shows that the
company has liquidated some assets from the total assets.
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QUICK RATIO: It is a display of the company’s short-term liquidity, and processes a

company’s capacity to meet its daily requirements with its most liquid assets.
FORMULA: (CURRENT ASSETS-INVENTORY) / CURRENT LIABILITIES

1.12

1.1

1.08

1.06

1.04

1.02

0.98

0.96
Quik(acid-test)ratio

Interpretation: Acid test ratio is also called a quick ratio which indicates that how more
quickly we satisfy our short term liabilities than the then-current ratio. In the current ratio, there
is an element of inventory that is not convertible into cash with the least time so we eliminate it
and get to know our liquidity without inventory.
From the above table information liquidity ratio was for the year 2015 is 1.21 and for the next
year 2016, it was increased to 1.04, for the year of 2017 it was again slightly increased to 1.06.
For the year 2018, it was increased to 1.09 and in the year 2019 is decreased to 1.11.

The standard quick ratio is followed 1:1 for the year 2019 company having higher than the
standard ratio so then the current ratio will sound good.
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Leverage ratios:

DEBT EQUITY RATIO: it the ratio that displays the proportion of equity and debt of the
company.

FORMULA: Debt Equity Ratio= Total Liabilities/ Total Share Holders Equity

2.5

1.5

0.5

0
Debt-to equity

Interpretation: The debt ratio indicates the firm's long term debt paying ability total
liabilities include short term liabilities reserves deferred tax liabilities non-controlling
interest redeemable preferred stock and any non-current liability it doesn’t include
shareholder equity. The debt ratio indicates the percentage of assets financed by the
creditors and it helps to determine how well creditors are protected in case of insolvency. If
creditors are not well protected the company is not in a position to issue additional long
term debt from the perspective of long term debt paying ability the lower this ratio the
better the company’s position. Fresh long-term loans obtained during the year to undertake
BMR as well as new projects with consideration to take advantage of the low markup rates
have enhanced the total longterm borrowing levels by Rs. 1.76 billion to Rs. 10.04 billion
despite the repayments during the year, However, the high volume of borrowings has
enhanced the debt portion and debt to equity ratio was 1.5 as compared to 1.8 at the end of
last year
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Interpretation: The formula for debt to tangible net worth is total debt divided by tangible net
worth. In general, a lower ratio is better. A low ratio means the business has lots of tangible
assets relative to the amount of debt it holds. If the ratio is increasing, that means either the
company is taking on more debt and liabilities or is losing cash and assets. Creditors are hesitant
to lend to a business with a high ratio because that means they are less likely to recoup their loan
value in the event of a liquidation debt total asset ratio in 2015 was 0.44 that was decreased to
0.55 in 20185that’s show the company debts are decreases and the asset increases gradually.
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Profitability ratios:

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
Net profit margin %

Interpretation: Net Profit Margin is an indication of the utilization of revenue which is

earned through generating the sales. In this ratio, companies examine how much they bear costs
to generate the sales, and after that what portion of their revenue save with them. In sales firstly
we bear the cost of goods manufacture and sold than there are other costs like administrative
expenses and selling expenses which are also deductible from the revenue of sales then taxation
and interest paid are deducted and after all these activities we have net income. And we check
the portion that how much we now save. The increase in Gross Profit volume was despite the
increase in raw material prices, no compensatory increase in selling prices and general inflation.
The increase in gross profit and effective control over selling & destruction and administrative
costs, the net profit to sales ratio also increased to 0.01 from 0.08 compared to last year

0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
Return on investment %
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Interpretation: It is used to measure the income earned on the invested capital. ROI of both
firms decreases in the first year because of the decrease in net income.
Whereas an increase in selling & distribution cost is due to enhanced sales volume and change in
PKR/US$ parity. Return on capital employed increased impressively from 0.02 to 0.06 due to an
increase in earnings.

0.25

0.2

0.15

0.1

0.05

0
Return on equity %

Interpretation: Return on total equity indicated that how much a company earns on the total
invested amount by both owner and the creditors. It shows that is firm utilizes its resources to
maximize its profit.
Return on total equity shows returns to both common and preferred stockholders as we discussed
earlier in the previous ratio that net income in the FY 2018 declined rapidly so there will be little
earning available for both common stock and preferred stock. Even in the case of Gul Ahmad
total net income declined to the extent of the loss. The increased profitability also helped in
improving return on equity from 0.08 to 0.23. that show increase in the capital of the company.
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0.25

0.2

0.15

0.1

0.05

0
gross profit margin %

Interpretation: Gross profit is the difference between the net sales revenue and cost of goods
sold. Comparing gross profit with net sales is said to be a gross profit margin. Gul Ahmad has a
more stable gross profit margin trend and increasing moderately. The increase in Gross Profit
volume was despite the increase in raw material prices, no compensatory increase in selling
prices and general inflation. The increase in gross profit and effective control over selling &
destruction and administrative costs, the net profit to sales ratio also increased to 0.18 from 0.22
compared to last year.

0.1

0.09

0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
operatin profit margin

Interpretation: It is a more conservative approach in nature. It includes only operating

income while computing profit margin. Due to the decline in the operating income of both
companies, both companies showing a decline in FY15. But as ssthe installation of a new asset
or plant of the Gul Ahmad, it comes into a higher operating income margin for three years and
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then again declines due to the higher operating expenses. Administrative costs were very
effectively controlled and there is a marginal change from last year despite an increase in
operational level and inflation. Whereas an increase in selling & distribution cost is due to
enhanced sales volume and change in PKR/US$ parity. The operating profit margin increase
from 0.06 to 0.09 as compared to the last year.

Activity ratios:
Asset turnover ratio processes the competence of company assets to produce revenue of sales.
FORMULA: Asset turnover ratio= revenue / net assets

1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
total assets turnover

Interpretation: The total asset turnover ratio has improved in the current year, as the net
value of property, plants, and equipment was higher at the end of the year due to additional
CAPEX. The total assets turnover was recorded in 2014 was 1.34 that is gradually
decreasing and increase in 2019 which was recorded 1.08 that shows the assets
turnover increases in 2019.
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45

40

35

30

25

20

15

10

0
inventory turnover

Interpretation: The inventory turnover is more or less at par for the last six years whereas
debtors’ turnover days had increased. The inventory turnover ratio was recorded in 2015 was
39.75 which was decreases gradually in the coming years and increased in 2019 which was 31.03
that shows the inventory turnover ratio was increased.

14

12

10

0
inventory turnoner in days

Interpretation: The inventory turnover in days’ ratio was calculated in 2015 was 9.18 days
which was continuously increased to 2019 which was 11.55 days that show the inventory
turnover in days’ increase.
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4.5

3.5

2.5

1.5

0.5

0
receivable turnover

Interpretation: The receivable turnover ratio debtors’ turnover has decreased due to
opportunity buying and carried overstock and higher yarn sales volume in the local market with
higher credit period and strategic non- discounting of export bills. The receivables turnover ratio
decrease from 4.43 to 4.0.

160

140

120

100

80

60

40

20

0
reveivable turnover in days

Interpretation: The receivable turnover in 2015 was 82.29 that was increased to
90.43 in 2019 that’s shows the receivables are turnover in days are increasing
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Coverage ratios:
4

3.5

2.5

1.5

0.5

0
coverage ratio

Interpretation: Though the level of debt was high increased profitability helped in the
increase in interest coverage ratio had increased to 3.68 from 1.58.
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.
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