Analysis of Financial

Statements (2012-2013)

Presented by:

MBA 90 D- 1B

Introduction

The journey of K-Electric Limited began a hundred years ago.

The Karachi Electric Supply Company Limited (KESC) was

established on September 13, 1913, to serve the power needs

of Karachi. Right from its inception, KESC served its consumers

with the utmost zeal.

The new management at K-Electric which took over in 2008

has introduced several successful initiatives that have

enabled significant value creation across the company’s

operations.

Mission & Vision

Vision is to restore and maintain pride of K-Electric, in

Karachi and in Pakistan.

Mission of the organization is to brightening the lives of

the people of Karachi by building the capacity to deliver uninterrupted, safe and affordable power.

Core ValuesWe always seek relevance to our values which include

integrity, accountability and the need for continuous

improvement.

•We Believe:

We speak as professionals, committed to helping the

customer.

•We are Trustworthy:We never make complicated explanations.•We are Open:

We speak clearly and concisely.

•We are Dependable:

The customer relies upon us to do the right thing because

we are responsible to the people and for protecting the

environment.•We think about You:

We take time to listen to you and to understand your

needs.

Products & Services

K- Electric is publicly listed; fully integrated power utility involved in

generation, transmission and distribution; Lighting up Karachi for

last 100 years.

• 28 Integrated Business Centers located across Karachi.

• 10,603 workers in different capacities.

• Covering the area of 6,500 sq km. with 2,431 MW of installed capacity of generating electricity.

• 52% of the city is exempted from load shed.

73%1%

2% 24% Residential

Public Sector

Industrial

Commercial

Total 2.5 Million (approx.) consumers

1.8 Million are Residential consumers

13,000 are of the public sector

60,000 are Industrial consumers and0.6 Million are Commercial.

Consumption of Electricity

K-Electric is the only vertically-

integrated power utility.

It has power purchase

agreements for 1021 MW from

various IPPs• WAPDA

• KANUPP

These purchases are based on

an optimized generation cost

that is governed by the fuel cost at the respective power facilities

and their operating efficiencies

Generation of Electricity

K-Electric’s transmission

system comprises a total of

1249 km of KV lines with 62

grid stations and 128 power

transformers.

The Company’s current

transmission losses are less

than 1.03%.

Distribution of Electricity

Distribution network ranks

amongst the largest

electricity networks in the

world.

The Power distribution and customer service is

efficiently managed though

distribution of the area into

four regions, which are

divided into a total of 28

distribution centers.

Transmission of Electricity

Analysis of Financial

Statements

Following are the methods of analyzing Financial

Statements:

1. PKR Change & % Change

2. Trend Analysis

3. Vertical Analysis

4. Ratio Analysis

Analysis of Financial

Statements

PKR Change & % Change

In PKR change and percentage change the

amount would be change in rupee and we can easily

calculate the percentage of the two years to show the

change; increase or decrease in assets or liabilities. The amount is calculated by the following formula

PKR change= Current Amount-Base Amount

Percentage change= PKR changeBase Amount

Analysis of Financial Statements

Trend Analysis:It is also called horizontal analysis. It is used

to disclosed the patterns of data and information which

covers the one or another period of time. It is calculated

by the following formula:

Trend Percentage= Current Amount X 100

Base Amount

Analysis of Financial Statements

Vertical Analysis:

By computing this type of analysis,

organization examines the size of each and every item

of financial statements. For common size Analysis

• In Balance Sheet total assets is 100% which determine the position of company

• In Income statement total revenue is 100% which

determine the performance of company.

It is calculated by the formula:

= Analysis Amount X 100Amount of Total Assets

Analysis of Financial Statements

Ratio Analysis:

Ratios are simply relationships between the two

financial calculations, and these ratios are made to

measuring the financial performance of the

organizations.

Types of Ratios:

• Short term Liquidity Ratio

• Long term credit Risk Ratio

• Profitability Ratio• Market price of common stock Ratio

Graphical Analysis

207.63

236.35

272.58 279.23

2010 2011 2012 2013

Assets (In Billions PKR)

Graphical Analysis

2010-11 2011-12 2012-13

Earning per

share-0.44 0.11 0.26

Market value

per share2.15 3.24 6.22

0

1

2

3

4

5

6

7

In P

KR

Investment Ratios

Graphical Analysis

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

2013 2012

Profit & loss Account

Revenue Operating Expenses Operating Profit

Graphical Analysis

103.9

130.7

162.8

194.7

2010 2011 2012 2013

Revenues ( in billions PKR)

0.7

0.57

0.69 0.71

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2010 2011 2012 2013

Current Ratios

Graphical Analysis

-14.6

-9.4

2.6

6.8

2010 2011 2012 2013

Net Profits/ Loss

(In Billions PKR)

Graphical Analysis

Graphical Analysis

33.1%33.5%

34.3%

36.6%

31.0%

32.0%

33.0%

34.0%

35.0%

36.0%

37.0%

2010 2011 2012 2013

Generation Fleet Efficiency

Short term Liquidity Ratio

Current ratio 0.71

The company has an ability to pay off the short term

debts

Quick Ratio 0.40The company has an ability to pay off the short term

debts

Working Capital(45,089,707)

The company has more current liabilities then

current assets

Net cash provided by operating activities 1,411,769 Cash generated by operations after allowing for cash

payment of expenses and operating liabilities

Cash flows from operations to current liabilities 0.01

It indicates the ability to cover currently maturing

obligations from recurring operations. It means

company has 0.01% ability to meet the current

obligations.

Receivables turnover rate 1.28

It indicates that the company is not receiving their

amounts quickly. The company is least concern

about the recovery of their receivablesDays to collect average accounts receivable 284.85

Free cash flow 4,544,887 Excess of operating cash flow over basic needs

Debt ratio 81%

It indicates the relative size of

the equity position. Company is

81% at financial risk.

Trend in net cash provided by

operating activities10,838,503

Previously the generation of

cash was less but now there is

an upward trend to meet the

obligations

Interest covering ratio -1.92

The company is not having

efficient ability to meet its

interests payment obligations

Long Term Credit Risks

Profitability Ratios

Gross profit rate 15.3% It shows the profitability of the company

Operating expense ratio -1% Management’s ability to control expenses

Operating income29,467,794

The profitability of the company's basic

business activities. Company has an ability

to make profits.

Net income as a percentage of net sales 4%An indicator of managements’ ability to

control costs

Return on assets 0.03Productivity of the assets; they are eligible

to pay their debts in respect of their assets.

Return on equity 13%

The rate of return earned on the

shareholders equity is high as compared to

2012.

Investment or Market Ratios

Earnings per share 0.26 It shows the earning per share

Market value per share 6.22 It shows the market value of share

Conclusion

In general, the ratios indicate a

continuous improvement trend in

financial health over the years. The

resolution of circular debt will further

improve the position.

Thank you…