financial statement-analysis-of-Pakistan-tobacco-company

Pakistan Tobacco Company | Final Project1

ACKNOWLEDGEMENT


[email protected] , [email protected]

TABLE OF CONTENTS


mailto:[email protected]



S. No. Topic Page Number

SECTION 1 41 Introduction to Report 42 Scope of Study 43 Significance of Study 4

SECTION 2 64 Introduction and History of

Pakistan Tobacco Company6

5 Vision 66 Mission Statement 67 Strategic Objectives 78 Company’s Brands 7

SECTION 3 99 Financial Analysis 2009-

20109

10 Financial Analysis 2010-2011

15


18


21

SECTION 4 2413 Ratio Analysis 2009-2013 2414 Liquidity Ratios 2415 Activity Ratios 2716 Profitability Ratios 3317 Financial leverage Ratio 3718 Interpretation of Analysis 4019 Trend Analysis 2009-2013

(PTC VS PMPKL)43

20 Tobacco Industry in Pakistan

43

21 Philip Morris Pakistan Limited (PMPKL)

43

SECTION 5 51

22 Conclusion 51

23 RECOMMENDATIONS 53

24 REFERENCES 53

SECTION-1

Introduction to Report Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that the strength and weaknesses of a firm as well as its historical performance and current financial condition can be determined. The term “ratio” refers to the numerical or quantitative relationship between two variables.

Scope of Study

The reader can have a brief introduction to the Pakistan tobacco company Complex form this report. It encompasses the financial statement analysis of Pakistan tobacco company Complex, their processes and procedures the various policies adopted by PTC. It also encompasses the financial ratios analysis of the company, and recommendations.

Significance of StudyIt Helps In Evaluating The Firms Performance:

With the help of ratio analysis conclusion can be drawn regarding several aspects such as financial health, profitability and operational efficiency of the undertaking. Ratio points out the operating efficiency of the firm i.e. whether the management has utilized the firm’s assets correctly, to increase the investor’s wealth. It ensures a fair return to its owners and secures optimum utilization of firms assets.


It helps in inter-firm comparison:

Ratio analysis helps in inter-firm comparison by providing necessary data. An interim comparison indicates relative position. It provides the relevant data for the comparison of the performance of different departments. If comparison shows a variance, the possible reasons of variations may be identified and if results are negative, the action may be intiated immediately to bring them in line.

It simplifies financial statement:

The information given in the basic financial statements serves no useful Purpose unless it s interrupted and analysed in some comparable terms. The ratio analysis is one of the tools in the hands of those who want to know something more from the financial statements in the simplified manner.

It helps in determining the financial position of the concern:

Ratio analysis facilitates the management to know whether the firms financial position is improving or deteriorating or is constant over the years by setting a trend with the help of ratios The analysis with the help of ratio analysis can know the direction of the trend of strategic ratio may help the management in the task of planning, forecasting and controlling.

It is helpful in budgeting and forecasting:

Accounting ratios provide a reliable data, which can be compared, studied and analysed. These ratios provide sound footing for future prospectus. The ratios can also serve as a basis for preparing budgeting future line of action.

It is helpful in determining Liquidity position:

With help of ratio analysis conclusions can be drawn regarding the Liquidity position of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligation when they become due. The ability to met short term liabilities is reflected in the liquidity ratio of a firm.


It is helpful in determining Long term solvency:

Ratio analysis is equally for assessing the long term financial ability of the Firm. The long term solvency is measured by the leverage or capital structure and profitability ratio which shows the earning power and operating efficiency, Solvency ratio shows relationship between total liability and total assets.

SECTION 2

Introduction and History of Pakistan Tobacco Company

Pakistan Tobacco Company Limited (PTC) is a part of British American Tobacco - the world's most international tobacco group - with brands sold in 180 markets around the world. Pakistan Tobacco's operations in Pakistan began in 1947, making it one of Pakistan's first foreign investments.The company produces high quality tobacco products to meet the diverse preferences of millions of consumers, and it works in all areas of the business - from seed to smoke. The company provides a number of reputed brands of cigarettes to consumers in Pakistan, including Benson and Hedges, Embassy, Gold Flake, Capstan and Gold Leaf.

Vision

“Like a lighthouse in a dark, stormy sea... Our vision serves as a beacon of light and hope, helping us navigates the waters”

Mission Statement


“Transform PTC to perform responsibly with the speed, flexibility and enterprising spirit of an innovative, consumer focused Company”

Strategic Objectives

“Our strategy reflects our vision of being the champions of Growth, Productivity, Responsibility and a Winning Organisation”

Company’s Brands“We have always considered ourselves a consumer focused company. We aim

to offer a product that excels in all aspects and exceeds the expectations of our consumers”

Pakistan Tobacco Company invests in trying to understand the consumers’ preferences and ensures that adult smokers make informed choices about different brands available in the market. We have put in particular effort in promoting two of our Global Drive Brands, Dunhill and Pall Mall; and two of our great value for money brands, John Player Gold Leaf and Gold Flake.

Dunhill

Dunhill, a premium global brand, celebrated its centenary in 2007.

2008 was an exceptional year for Dunhill in Pakistan as the brand witnessed exponential growth; fuelled by its re-launch in July. Going forward, Dunhill is poised to strengthen its foothold in the premium segment.

Benson & Hedges

In 1873, Richard Benson & William Hedges started a partnership in London.

Benson & Hedges was launched in Pakistan in March 2003 and has since been able to build strong brand loyalty among its consumers showing excellent year on year growth.


Gold Leaf

The story of John Player Gold Leaf has to start from the story of its founder, John Player. An enterprising businessman, John Player started a small tobacco selling business in 1877 and turned it into a thriving cigarette company, John Player and Sons.

John Player Gold Leaf has become an institution in itself, becoming one of the most recognisable cigarette brands in the country. John Player Gold Leaf has recently been declared the largest Urban Brand in Pakistan, beating out products across the F.M.C.G. spectrum.

Capstan

Capstan has a rich heritage, originating in Britain in the 19th century. The brand was created under the auspices of W.D. & H.O. WILLS at Bristol and London.

Gold Flake

Gold Flake has grown tremendously as a brand since 2004, making it the largest volume brand in Pakistan, and the second largest brand in British American Tobacco's Asia Pacific region. The key to Gold Flake’s success has been its novel engagement schemes which have fuelled growth over the years. Through consumer relevant initiatives, Gold Flake has established itself as a fresh and modern offering in the VFM segment and is all set to consolidate its position as the major volume driver for Pakistan Tobacco Company.

Embassy

Embassy, is a leading volume brand in Pakistan, and is most popular in Punjab where it enjoys a leading position. Having built its heritage over a number of years, Embassy thrives on its brand loyalty and locally tailored taste characteristics.


SECTION 3

INTRODUCTION TO FINANCIAL STATEMENT ANALYSIS

In financial management, one of the planned and technical basis on which firm decisions are made quickly and secure is the financial statement analysis. Drake (2010) defined that financial statement analysis is the process of selection, evaluation and interpretation of financial data. Further, he stated that it also shows other pertinent information which help in investment and financial decision making. In addition, it is also the process of identifying financial strengths and weaknesses of the firm by properly establishing the relationship between balance sheet and income statement items.

The basic tool in financial statement analysis is financial ratio analysis. As we know that financial statements are generally lengthy, therefore finance and accounting scholars developed predefined formulas which are more efficient and strategic in evaluating the overall financial condition of a corporation or other organization.

Financial Ratios

The result of financial ratio is obtained by dividing one financial data with other and is applied to indicate the relationship of different financial variables. Calculating ratios balance sheet and income statement are the most common and important sources of financial information. Woo & Baker (2005) studied that unseen and ignore data when examined individually would be showed by the financial ratios through the appearance of many data’s as ratios. Financial


ratio analysis includes the calculation and analysis of ratios that use data from one, two or more financial statements.

Liquidity RatiosLiquidity is the capability of a firm to sell assets at a sound price to meet its short term financial debts. Liquidity ratios verified that a particular firm has sufficient resources to meet its current liabilities, which are payable within a year.

Current Ratio

current ratio is the ability of a company to meet its debts requirements as they come payable. Current assets are used as the numerator, whereas current liabilities are used as the denominator of the ratio to signify the most urgent debts, requiring due within one year.

Quick Ratio

Quick or acid test ratio is the ability of a company to meet its current liabilities as they come due immediately. Quick ratio eliminates the liquidation of inventories from the numerator, measured the least liquid current assets. Quick ratio confirmed that the firm has sufficient quick assets to pay its short term debts.

Activity Ratios

Activity or turnover ratio represents the firm’s ability to obtain the highest income by using its resources correctly. Baruch (1974) said that calculating turnover ratios sales revenue remains as the numerator whereas assets, account receivables, inventory etc are used as the denominator.

Accounts Receivable Turnover

The accounts receivable turnover ratio measures how many times, on average, accounts receivable are collected in cash during the year.

Accounts Payable Turnover


The accounts payable turnover ratio measures how many times, on average, accounts payable are paid during the year.

Fixed Assets Turnover

Fixed assets turnover is extremely important for a capital intensive company and considers only the company’s investment in fixed assets.

Inventory Turnover

Inventory turnover ratio is employed to represent the number of times inventory is sold or used in the company during the financial era. All of the firm’s prefer a beneficial rate of inventory turnover, which is neither too high nor too low.

Total Assets Turnover

Total assets turnover shows that how many times the annual sales crosses the total assets (Sharma 2012). It measures the efficiency of managing all of a company’s assets (Fraser & Ormiston 2004).

Leverage Ratios

leverage ratios involves the debt obligations a company holds along with the shareholder’s equity. It is used to show the firm’s ability to meet its financial obligations.

Debt to Assets RatioThe ratio of total debt to total assets measures the percentage of funds provided by creditors. Further, Fraser & Ormiston (2004) shows that it is the percentage of all assets that are financed with debt.

Debt to Equity


That the debt to equity ratio measures the riskiness of the company’s capital structure in terms of the relationship between the funds supplied by creditors and investors.

Profitability Ratios

Profitability ratios indicate the overall efficiency and performance of firm. Some of the major profitability ratios are discussed as under.

Gross Profit Margin

Gross Profit Margin shows the total increase between Cost of Goods Sold and sales revenue. It also reflects the efficiency with which the management produces each unit of product (Brealey& Myers 1984).

Net Profit Margin

Net Profit Margin signifies the overall measure of a company’s ability to turn each rupee sales into net profit. It also establishes relationship between sales and net profit. Further, it indicates management’s efficiency in administering, manufacturing and selling the products (Brealey& Myers 1984).

Return on Assets

Return on assets ratio shows that how competently total assets has been utilized by the company. It also indicates the overall rate of return on total assets of the firm. To determine return on total assets net income is compared with total assets of the company.

Return on Equity

Return on Equity ratio demonstrates that how efficiently firms utilize common stock holder’s equity in company. It also indicates the amount of net income a common shareholder receives for a dollar of his/her equity.


Financial Analysis 2009-2010Balance Sheet (Horizontal Analysis)

ITEMS 2009 2010 Horizontal Analysis

NON CURRENT ASSETS

Property plant and Equipment

5,952,108 5,823,688 5,823,688- 5,952,108÷ 5,952,108

(2.16)%

Investment in Subsidiary Company

5,000 5,000 5000 – 5000 ÷ 5000 ---

Long term Loans 7,310 3,417 3,417– 7,310 ÷ 7,310 (53.26)%

Long Term Deposits 19,915 15,375 15,375– 19,915 ÷ 19,915 (22.80)%

CURRENT ASSETS

Stock in Trade 5,765,367 6,002,823 6,002,823– 5,765,367 ÷ 5,765,367

4.12%

Stores and Spares 218,375 199,207 199,207– 218,375 ÷ 218,375

(8.78)%

Trade Debts 1,684 1,597 1,597– 1,684 ÷ 1,684 (5.17)%

Loans and Advances 48,598 48,267 48,267– 48,598 ÷ 48,598 (0.68)%

Short term Payments

72,483 118,329 118,329– 72,483 ÷ 72,483 63.25%

Other Receivables 88,147 93,546 93,546– 88,147 ÷ 88,147 6.12%

Cash and Bank 47,874 51,945 51,945– 47,874 ÷ 47,874 8.50%Total Current Assets 6,242,528 6,530,920 6,530,920– 6,242,528 ÷ 4.38%


6,242,528Total Assets 12,226,861 12,363,19

612,363,196– 12,226,861 ÷

12,226,8611.12%

Balance Sheet

ITEMS 2009 2010 Horizontal AnalysisSHARE CAPITAL AND RESERVES

Share Capital 2,554,938 2,554,938 2,554,938 – 2554938 ÷ 2554938

---

Revenue Reserves 1,705,296 1,047,149 1,047,149– 1,705,296 ÷ 1,705,296

(38.59)%

NON CURRENT LIABILITIES

Retirement Benefits --- --- ---

Deferred Taxation 1,109,847 1,137,581 1,137,581– 1,109,847 ÷ 1,109,847

2.50%

CURRENT LIABILITIES

Trade and other payables

5,037,469 5,339,725 5,339,725– 5,037,469 ÷ 5,037,469

6.00%

Accrued Interest 27,659 46,789 46,789– 27,659 ÷ 27,659 69.16%

Short term running finance

1,300,837 2,252,218 2,252,218– 1,300,837 ÷ 1,300,837

73.14%

Income tax liability 490,815 (15,206) (15,206)– 490,815 ÷ 490,815 (103.10)%

Total Current Liabilities

6,856,780 7,623,526 7,623,526– 6,856,780 ÷ 6,856,780

11.18%


Total Liabilities 12,226,861 12,363,196 12,363,196– 12,226,861 ÷ 12,226,861

1.12%

Profit and Loss Account


Gross turnover 57,544,309 60,195,535 60,195,535– 57,544,309÷ 57,544,309

4.61%

Excise Duties 27,654,345 30,476,421 30,476,421– 27,654,345÷ 27,654,345

10.20%

Sales Tax 8,223,439 8,766,485 8,766,485– 8,223,439÷ 8,223,439 6.60%

Net Sales 21,666,525 20,952,629 20,952,629– 21,666,525÷ 21,666,525

(3.29)%

Cost of Sales 13,442,066 14,747,717 14,747,717– 13,442,066÷ 13,442,066

9.71%

Gross Profit 8,224,459 6,204,912 6,204,912– 8,224,459÷ 8,224,459 (24.56)%

Selling and distribution

2,246,014 3,279,390 3,279,390– 2,246,014÷ 2,246,014 46.01%

Administrative Expenses

1,100,814 1,233,165 1,233,165– 1,100,814÷ 1,100,814 12.02%

Other Operating Income

226,499 46,610 46,610– 226,499÷ 226,499 (79.42)%

Other Operating Expense

514,665 208,211 208,211– 514,665÷ 514,665 (59.54)%

Operating Profit 4,589,465 1,530,756 1,530,756– 4,589,465÷ 4,589,465 (66.65)%

Finance Income 102,826 36,933 36,933-102,826÷ 102,826 (64.08)%

Finance Cost 43,802 149,680 149,680– 43,802÷ 43,802 241.72%

Profit Before 4,648,489 1,418,009 1,418,009– 4,648,489÷ 4,648,489 69.50)


Tax %Income Tax Expense

1,626,083 492,909 492,909– 1,626,083÷ 1,626,083 (69.69)%

Profit of the Year

3,022,406 925,100 925,100– 3,022,406÷ 3,022,406 (69.39)%

Financial Analysis 2009–2010

Balance Sheet (Vertical Analysis)

ITEMS 2009 2010 Vertical Analysis

NON CURRENT ASSETS

Property plant and Equipment

5,952,108 5,823,688 5,823,688÷ 12,363,196

47.11%


5,000 5,000 5,000÷ 12,363,196 0.04%

Long term Loans 7,310 3,417 3,417÷ 12,363,196 0.03%Long Term Deposits 19,915 15,375 15,375÷ 12,363,196 0.12%

CURRENT ASSETS

Stock in Trade 5,765,367 6,002,823 6,002,823÷ 12,363,196

48.55%

Stores and Spares 218,375 199,207 199,207÷ 12,363,196 1.61%

Trade Debts 1,684 1,597 1,597÷ 12,363,196 0.01%

Loans and Advances 48,598 48,267 48,267÷ 12,363,196 0.39%

Short term Payments

72,483 118,329 118,329÷ 12,363,196 0.96%

Other Receivables 88,147 93,546 93,546÷ 12,363,196 0.76%


Cash and Bank 47,874 51,945 51,945÷ 12,363,196 0.42%Total Current Assets 6,242,528 6,530,920 6,530,920÷

12,363,19652.70%

Total Assets 12,226,861 12,363,196

12,363,196÷ 12,363,196

100.00%

Balance Sheet

ITEMS 2009 2010 Vertical Analysis

SHARE CAPITAL AND RESERVES

Share Capital 2,554,938 2,554,938 2,554,938÷12,363,196 20.67%

Revenue Reserves 1,705,296 1,047,149 1,047,149÷12,363,196 8.47%


Retirement Benefits --- --- ---

Deferred Taxation 1,109,847 1,137,581 1,137,581÷12,363,196 9.20%

CURRENT LIABILITIES


5,037,469 5,339,725 5,339,725÷12,363,196 43.19%

Accrued Interest 27,659 46,789 46,789÷12,363,196 0.38%


1,300,837 2,252,218 2,252,218÷12,363,196 18.22%

Income tax liability 490,815 (15,206) (15,206) ÷12,363,196 (0.12)%

Total Current Liabilities

6,856,780 7,623,526 7,623,526÷12,363,196 61.66%


Total Liabilities 12,226,861

12,363,196 12,363,196÷12,363,196 100.00%

Profit and Loss AccountITEMS 2009 2010 Vertical Analysis

Gross turnover 57,544,309 60,195,535 60,195,535÷ 20,952,629 207.29%

Excise Duties 27,654,345 30,476,421 30,476,421÷ 20,952,629 145.45%

Sales Tax 8,223,439 8,766,485 8,766,485÷ 20,952,629 418.40%

Net Sales 21,666,525 20,952,629 20,952,629÷ 20,952,629 100.00%

Cost of Sales 13,442,066 14,747,717 14,747,717÷ 20,952,629 70.39%

Gross Profit 8,224,459 6,204,912 6,204,912÷ 20,952,629 29.61%


2,246,014 3,279,390 3,279,390÷ 20,952,629 15.65%


1,100,814 1,233,165 1,233,165÷ 20,952,629 5.89%


226,499 46,610 46,610÷ 20,952,629 0.22%


514,665 208,211 208,211÷ 20,952,629 0.99%

Operating Profit 4,589,465 1,530,756 1,530,756÷ 20,952,629 7.31%

Finance Income 102,826 36,933 36,933÷ 20,952,629 0.18%

Finance Cost 43,802 149,680 149,680÷ 20,952,629 0.71%

Profit Before Tax

4,648,489 1,418,009 1,418,009÷ 20,952,629 6.77%


Income Tax Expense

1,626,083 492,909 492,909÷ 20,952,629 2.35%

Profit of the Year

3,022,406 925,100 925,100÷ 20,952,629 4.42%

Financial Analysis 2010-2011

Balance Sheet


Vertical Analysis

NON CURRENT ASSETSProperty plant and Equipment

5,823,688

6,099,879 4.74 46.05


5,000 5,000 -- 0.04

Long term Loans 3,417 1,260 63.13) 0.01

Long Term Deposits and Payments

15,375 22,640 47.25 0.17

CURRENT ASSETS

Stock in Trade 6,002,823

6,462,330 7.65 48.78

Stores and Spares 199,207 190,110 (4.57) 1.44

Trade Debts 1,597 1,202 (24.73) 0.01

Loans and Advances 48,267 64,310 33.24 0.49

Short term Payments 118,329 94,052 (20.52) 0.71

Other Receivables 93,546 196,249 109.79 1.48


Cash and Bank Balances

51,945 109,631 111.05 0.83

Total Current Assets 6,530,920

7,117,884 9.24 53.73

Total Assets 12,363,196

13,246,663 7.15 100.00

Balance SheetITEMS 2010 2011 Horizontal

AnalysisVertical Analysis


Share Capital 2,554,938 2,554,938 --- 19.29

Revenue Reserves 1,047,149 778,997 (25.61) 5.88


Retirement Benefits --- ---

Deferred Taxation 1,137,581 1,082,038 (4.88) 8.17

CURRENT LIABILITIES


5,339,725 7,075,299 32.50 53.41

Accrued Interest 46,789 51,187 9.40 0.39


2,252,218 1,783,623 (20.81) 13.46


Income tax liability (15,206) (79,419) 422.29 (0.60)

Total Current liability

7,623,526 8,830,690 15.83 66.66

Total Liabilities 12,363,196 13,246,663 7.15 100.00

Profit and Loss AccountITEMS 2010 2011 Horizontal


Gross turnover 60,195,535 67,491,816 12.12 294.08

Excise Duties 30,476,421 34,719,661 13.92 151.28

Sales Tax 8,766,485 9,822,181 12.04 463.55

Net Sales 20,952,629 22,949,974 9.53 100.00

Cost of Sales 14,747,717 16,709,273 13.30 72.81

Gross Profit 6,204,912 6,240,701 0.58 27.19


3,279,390 3,129,938 (4.56) 13.64


1,233,165 1,321,713 7.18 5.76


46,610 53,967 15.78 0.24


208,211 1,182,363 467.87 5.15

Operating Profit 1,530,756 660,654 (56.84) 2.88

Finance Income 36,933 39,160 6.03 0.17


Finance Cost 149,680 140,539 (6.11) 0.61

Profit Before Tax 1,418,009 559,275 (60.56) 2.44

Income Tax Expense

492,909 195,490 (60.34) 0.85

Profit of the Year 925,100 363,785 (60.68) 1.59


Balance SheetITEMS 2011 2012 Horizontal



6,099,879 5,694,961 (6.64) 41.02


5,000 5,000 --- 0.04

Long term Loans 1,260 457 (63.73) ---


22,640 20,286 (10.40) 0.15

CURRENT ASSETS

Stock in Trade 6,462,330 7,225,301

11.81 52.04

Stores and Spares 190,110 341,855 79.82 2.46

Trade Debts 1,202 1,073 (10.73) 0.01


Short term Payments 94,052 99,509 5.80 0.72




109,631 139,030 26.82 1.00

Total Current Assets 7,117,884 8,163,096

14.68 58.80

Total Assets 13,246,663 13,883,800

4.81 100.00

Balance Sheet


Vertical Analysis


Share Capital 2,554,938 2,554,938

99.29 18.40

Revenue Reserves 778,997 1,552,462

23.20 11.18


Retirement Benefits ---

Deferred Taxation 1,082,038 1,090,892

0.82 7.86

Deferred Liabilities 96,024 --- .69

CURRENT LIABILITIES


7,075,299 6,991,911

(1.18) 50.36


Accrued Interest 51,187 40,880 (20.14) 0.29


1,783,623 1,237,772

(30.60) 8.92

Lease Liability 50,009 --- .36

Income tax liability (79,419) 268,912 (438.60) 1.94


8,830,690 8,589,484

(2.73) 61.87

Total Liabilities 13,246,663 13,883,800 4.81 100.00



Vertical Analysis

Gross turnover 67,491,816 75,531,228 11.91 219.85

Excise Duties 34,719,661 38,854,830 11.91 150.13

Sales Tax 9,822,181 10,796,089 9.92 41.72

Net Sales 22,949,974 25,880,309 12.77 100.00

Cost of Sales 16,709,273 17,434,790 4.34 67.37

Gross Profit 6,240,701 8,445,519 35.33 32.63Selling and distribution

3,129,938 3,516,601 12.35 13.59


1,321,713 1,381,918 4.56 5.34


53,967 90,400 67.51 0.35


1,182,363 908,888 (23.13) 3.51

Operating Profit 660,654 2,728,512 313.00 10.54

Finance Income 39,160 65,057 66.13 0.25


Finance Cost 140,539 138,533 (1.43) 0.54

Profit Before Tax 559,275 2,655,036 374.73 10.26

Income Tax Expense

195,490 926,578 373.98 3.58

Profit of the Year 363,785 1,728,458 375.13 6.68


Balance Sheet


Vertical Analysis


5,694,961 7,084,521

24.40 40.65


5,000 5,000 - 0.03

Long term Loans 457 75 (83.59) --


20,286 21,478 5.88 0.12

CURRENT ASSETS

Stock in Trade 7,225,301

9,166,367

26.86 52.59

Stores and Spares 341,855 488,213 42.81 2.80

Trade Debts 1,073 764 (28.80) ---



Short term Payments 99,509 78,889 (20.72) 0.45



139,030 60,128 (56.75) 0.34

Total Current Assets 8,163,096

10,318,995

26.41 59.20

Total Assets 13,883,800

17,430,069

25.54 100.00

Balance Sheet


Vertical Analysis


Share Capital 2,554,938

2,554,938

--- 14.66

Revenue Reserves 1,552,462

2,857,270

84.05 16.39


Retirement Benefits

Deferred Taxation 1,090,892

1,014,118

(7.04) 5.82

Deferred Liabilities 96,024 293,044 205.18 1.68

CURRENT LIABILITIES


6,991,911

7,724,746

10.48 44.32

Accrued Interest 40,880 27,048 (33.84) 0.16


1,237,772

2,436,445

96.84 13.98


Lease Liability 50,009 92,559 85.08 0.53

Income tax liability 268,912 429,901 59.87 2.47


8,589,484

10,710,699

24.70 61.45

Total Liabilities 13,883,800 17,430,069

25.54 100.00



Vertical Analysis

Gross turnover 75,531,228 89,928,975 19.06 283.87

Excise Duties 38,854,830 46,110,971 18.68 150.57

Sales Tax 10,796,089 13,195,201 22.22 43.09

Net Sales 25,880,309 30,622,803 18.32 100.00

Cost of Sales 17,434,790 20,012,587 14.79 65.35

Gross Profit 8,445,519 10,610,216 25.63 34.65


3,516,601 4,022,635 14.39 13.14


1,381,918 1,716,314 24.20 5.60


90,400 129,129 42.84 0.42


908,888 397,959 (56.21) 1.30

Operating Profit 2,728,512 4,602,437 68.68 14.99

Finance Income 65,057 136,487 109.80 0.45

Finance Cost 138,533 72,019 (48.01) 0.24

Profit Before Tax 2,655,036 4,666,905 75.78 15.24


Income Tax Expense

926,578 1,542,596 66.48 5.04

Profit of the Year 1,728,458 3,124,309 80.76 10.20

SECTION 4

Ratio Analysis 2009-2013

Liquidity Ratios1. Current Ratio

(Rs. ‘000)

Current Ratio= Current AssetsCurrent Liabilities

Years Current Assets Current Liabilities Current Ratio

2009 6,242,528 6,856,780 0.91

2010 6,515,716 7,623,526 0.85

2011 7,117,884 8,830,690 0.81

2012 8,163,096 8,589,484 0.95

2013 10,318,995 10,710,699 0.96


2009 2010 2011 2012 20130.7

0.75

0.8

0.85

0.9

0.95

1

Current Ratio

2. Quick Ratio (Rs. ‘000)

Quick Ratio=Current Assets−InventoryCurrent Liabilities

Years Current Assets Current Liabilities Quick Ratio

2009 4,77,161 6,856,780 0.07

2010 512,892 7,623,526 0.07

2011 655,554 8,830,690 0.07

2012 937,795 8,589,484 0.11

2013 1,152,628 10,710,699 0.11


2009 2010 2011 2012 20130

0.02

0.04

0.06

0.08

0.1

0.12

Quick Ratio

3. Interest Coverage Ratio (Rs. ‘000)

¿ Interest Earned=Profit Before TaxationInterst Expenses

Years Profit Before Taxation

Interest Expense Times Interest Earned

2009 4,648,489 1,626,083 2.86

2010 1,418,009 492,909 2.88

2011 559,275 195,490 2.86

2012 2,655,036 926,578 2.87


2013 4,666,905 1,542,596 3.03

2009 2010 2011 2012 20132.75

2.8

2.85

2.9

2.95

3

3.05

Times Interest Earned

Activity Ratios1. Inventory Turnover

(Rs. ‘000)

Inventory Turnover=Cost of SalesInventory

Years Cost of Sales Inventory Inventory Turnover

2009 13,442,066 5,765,367 2.33

2010 14,747,717 6,002,824 2.46

2011 16,709,273 6,462,330 2.59


2012 17,434,790 7,225,301 2.41

2013 20,012,587 9,166,367 2.18

2009 2010 2011 2012 20131.9

2

2.1

2.2

2.3

2.4

2.5

2.6

2.7

Inventory Turnover

2. (a)Account Receivables Turnover (Rs. ‘000)

Accounts RecieveablesTurnover= Credit SalesAccounts Recieveables

Years Credit Sales Account Receivables

A/R Turnover

2009 158,528 1,684 94.14


2010 95,399 1,597 59.74

2011 102,703 1,202 85.44

2012 91,447 1,073 85.23

2013 147,359 764 192.88

2009 2010 2011 2012 20130

50

100

150

200

250

A/R Turnover

3. (b)Account Receivables Collection Period

Accounts Recieveables Collection Period= 365Accounts Recieveables Turnover

Years Days in a Year A/R Turnover Collection Period


2009 365 94.13777 4 days

2010 365 59.73638 6 days

2011 365 85.44343 4 days

2012 365 85.22554 4 days

2013 365 192.8783 2 days

2009 2010 2011 2012 20130

1

2

3

4

5

6

7

Collection Period in days

4. Account Payable Turnover (Rs. ‘000)

Accounts PayablesTurnover= Credit PurchasesAccounts Payables


Years Credit Purchases Account Payable

A/P Turnover

2009 712,765 37,469 19.02

2010 302,256 39,725 7.61

2011 1,735,574 75,299 23.05

2012 83,388 1,911 43.64

2013 732,835 24,746 29.61

2009 2010 2011 2012 201305

101520253035404550

A/P Turnover

4. (b)Account Payable Payment Period

Accounts Payables Payment Period= 365Accounts PayablesTurnover


Years Days in a Year A/P Turnover Payment Period

2009 365 19.02 19 days

2010 365 7.61 48 days

2011 365 23.05 15 days

2012 365 43.64 8 days

2013 365 29.61 12days

2009 2010 2011 2012 20130

10

20

30

40

50

60

Payment Period

5. Assets Turnover Ratio (Rs. ‘000)

AssetsTurnover= Net SalesTotal Assets


Years Sales Total Assets Assets Turnover

2009 21,666,525 12,226,861 1.77

2010 20,952,629 12,363,196 1.69

2011 22,949,974 13,246,663 1.73

2012 25,880,309 13,883,800 1.86

2013 30,622,803 17,430,069 1.76

2009 2010 2011 2012 20131.6

1.65

1.7

1.75

1.8

1.85

1.9

Assets Turnover



1. Gross Profit Margin (Rs. ‘000)

Gross Profit Margin=Gross ProfitNet Sales

Years Gross Profit Net Sales Gross Profit Margin

2009 8,224,459 21,666,525 38%

2010 6,204,912 20,952,629 30%

2011 6,240,701 22,949,974 27%

2012 8,445,519 25,880,309 33%

2013 10,610,216 30,622,803 35%

2009 2010 2011 2012 20130%

5%

10%

15%

20%

25%

30%

35%

40%

Gross Profit Margin


2. Net Profit Margin (Rs. ‘000)

Net Profit Margin=Net Operating ProfitNet Sales

Years Net Operating Profit

Net Sales Net Profit Margin

2009 4,589,465 21,666,525 21%

2010 1,530,756 20,952,629 7%

2011 660,654 22,949,974 3%

2012 2,728,512 25,880,309 11%

2013 4,602,437 30,622,803 15%

2009 2010 2011 2012 20130%

5%

10%

15%

20%

25%

Net Profit Margin


3. Return on Assets (Rs. ‘000)

ReturnOn Assets= Net IncomeTotal Assets

Years Net Income Total Assets Return on Assets

2009 3,022,406 12,226,861 25%

2010 925,100 12,363,196 7%

2011 363,785 13,246,663 3%

2012 1,728,458 13,883,800 12%

2013 3,124,309 17,430,069 18%

2009 2010 2011 2012 20130%

5%

10%

15%

20%

25%

30%

Return on Assets


4. Return On Equity (Rs. ‘000)

Returnon Equity= Net IncomeTotalStock Holders Equity

Years Net Income Equity Return on Equity

2009 3,022,406 7,271,828 42.08%

2010 925,100 9,550,928 10.91%

2011 363,785 1,499,568 25.68%

2012 1,728,458 2,485,098 70.94%

2013 3,124,309 4,485,098 70.18%

2009 2010 2011 2012 20130.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Return on Equity


Financial leverage Ratios1. Debt To Total Assets Ratio

(Rs. ‘000)

Debt ¿ Asset Ratio= Total DebtsTotal Assets

Years Total Debts Total Assets Debt to Assets Ratio

2009 7,966,627 12,226,861 0.65

2010 8,761,107 12,363,196 0.71

2011 9,912,728 13,246,663 0.75

2012 9,776,400 13,883,800 0.70

2013 12,017,861 17,430,069 0.69

2009 2010 2011 2012 20130.6

0.62

0.64

0.66

0.68

0.7

0.72

0.74

0.76

Debt to Assets Ratio


2. Debt To Equity Ratio (Rs. ‘000)

Debt ¿ Equity Ratio= Total DebtsTotal Equity

Years Total Debts Total Equity Debt to Equity Ratio

2009 7,966,627 7,271,828 1.10

2010 8,761,107 9,550,928 0.92

2011 9,912,728 1,499,568 6.61

2012 9,776,400 2,485,098 3.93

2013 12,017,861 4,485,098 2.68

2009 2010 2011 2012 20130

1

2

3

4

5

6

7

Debt to Equity Ratio


3. Debt To Total Capitalization Ratio (Rs. ‘000)

Debt ¿TotalCapitalization Ratio= Total DebtsTotal Debts+Total Equity

Years Total Debts Total Debts +

Total Equity

Debt to Capitalization Ratio

2009 7,966,627 15,238,455 0.52

2010 8,761,107 18,312,035 0.48

2011 9,912,728 11,412,296 0.87

2012 9,776,400 12,261,498 0.80

2013 12,017,861 16,502,959 0.73


2009 2010 2011 2012 20130

0.10.20.30.40.50.60.70.80.9

1

Debt to Capitalization Ratio

Interpretation of Analysis

Liquidity RatiosThe analysis of Pakistan Tobacco Company’s financial statement shows that it has a high tendency to pay its debts and to convert assets into liquid form within short intervals of time.

The current ratio of PTC remained between 0.81 – 0.96 in the last five years and it shows its ability to pay short term liabilities.

o Current Ratio= Current AssetsCurrent Liabilities


The quick ratio of PTC ranged between 0.07– 0.11 from 2009 to 2013. It shows the company’s ability to convert its current assets into liquid form (cash form) in order to meet current liabilities.

Quick Ratio=Current Assets−InventoryCurrent Liabilities

The average value of Times interest earned of PTC is approximately 2.8 for previous five years. IT PROVIDES COMPANY’S ABILITY TO MEET interest payments as they come due. Times interest earned (TIE) or interest coverage ratio is a measure of a company's ability to honour its debt payments. The times interest earned lets the creditor understand whether or not a company has sufficient income to cover its interest payments requirements. It is calculated by taking a company's earnings before interest and taxes (EBIT) and dividing it by the total interest payable on bonds and other contractual debt.

¿ Interest Earned=Profit Before TaxationInterst Expenses

Activity Ratios

On yearly basis from the year 2009 – 2013, we observed that the number of times the total inventory or stock of the company was sold on the average of 2.59 times/year. It shows the sales of the company are on a very large scale and also gives rise to the company opportunity to generate huge profits in the long run.

InventoryTurnover= Cost of SalesAverage Inventory

Account Receivables Turnover shows that how many times a company is able to recover the amount of credit sales to people. PTC has shown a high Accounts Receivables turnover rate which shows its high liquidity transformation rate.

Accounts RecieveablesTurnover= Credit SalesAverage Accounts Recieveables


Account Payable Turnover shows that how many times a company is able to pay the amount of credit purchases to people. PTC has shown a high Accounts Payable turnover rate which shows its high liquidity transformation rate.

Accounts PayablesTurnover= Credit PurchasesAccounts Payables

Assets turnover of the company ranges between 1.69 - 1.86 times per year. It shows the generation of huge sales from the worth of assets of the company and in the case of Pakistan Tobacco Company, it shows the firm's efficiency at using its assets in generating sales or revenue - the higher the number the better.

AssetsTurnover= Net SalesAverage Total Assets


Pakistan Tobacco Companies Profitability ratios clearly reflect it’s great ability to generate huge profits and of generating dividends for its shareholders.

The gross profit margin of PTC lies between 27% - 38% in previous five years. It measures the percentage of each dollars of sales that results in net income. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors.

Gross Profit Margin=Gross ProfitNet Sales

The return on assets of PTC ranges among 0.03 to 0.25 according to preceding five years record. An overall measure of profitability is return on assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. This number tells you what the company can do with what it has, i.e. how many rupees of earnings they derive from each rupee of assets they control.


Returnon Assets Turnover= Net IncomeTotal Assets

Return on equity of PTC varies between 10% –70% between the years 2009 to 20013. Another widely used profitability ratio is return on common stockholder’s equity. It measures profitability from common stockholder’s point of view. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. Averaging ROE over the past 5-10 years can give you a better idea of the historical growth.

Returnon Equity= Net IncomeTotalStock Holders Equity

SOLVENCY RATIOS

Solvency ratios measure the ability of a company to survive over a long period of time. It provides a measurement of how likely a company will be to continue meeting its debt obligations. Different countries use different methodologies to calculate the solvency ratio, and have different requirements.

Debt to total assets ratio measures the percentage of total assets that creditors provide. A metric used to measure a company's financial risk by determining how much of the company's assets have been financed by debt. If the ratio is less than one, most of the company's assets are financed through equity. If the ratio is greater than one, most of the company's assets are financed through debt. Calculated by adding short-term and long-term debt and then dividing by the company's total assets.

Trend Analysis 2009-2013


Financial Performance ofPakistan Tobacco Company (PTC) andPhilip Morris Pakistan Limited (PMPKL)

Through Ratio Analysis

Tobacco Industry in PakistanTobacco Industry has played a vital role in development of Pakistan economy. It is considered a dominant and revenue generator industry. The market is dominated by two major players Pakistan Tobacco Company (PTC) and Philip Morris Pakistan Limited (PMPKL – previously known Lakson Tobacco Company). Pakistan Tobacco Company (PTC) having an approximately 50% market shares and Philip Morris Pakistan Limited (PMPKL) having 32% market shares.While the remaining 18% market share consists of small home players (usually out of tax bracket sold in interiors) and therefore their prices are lower than the regulated segment.

Philip Morris Pakistan Limited (PMPKL)Philip Morris Pakistan Limited (PMPKL) is an affiliate of Philip Morris International (PMI). Formerly it was known as Lakson Tobacco Company, which started it business in 1969 as a public limited company. However, the name was changed in 2011 to Philip Morris Pakistan Limited (PMPKL) and acquired a majority shareholder in local business in 2007. Currently, PMPKL has a tobacco leaf threshing plant, three cigarette manufacturing factories and sale offices across the country and employs around 2500 people (www.philipmorrispakistan.com.pk).

ObjectivesFinancial performance of Pakistan Tobacco Company (PTC) and Philip Morris Pakistan Limited (PMPKL) through ratio analysis” has been planned to accomplish the following objectives;

To compare the financial performance of PTC and PMPKL through ratio analysis.


http://www.philipmorrispakistan.com.pk/

4. Current Ratio (Rs. ‘000)

Years Pakistan Tobacco Company

Philips Morris Pakistan Ltd

2009 0.91 1.98

2010 0.85 1.99

2011 0.81 1.72

2012 0.95 1.07

2013 0.96 1.1

20092010

20112012

2013

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

PTC

PMPKL

PTCPMPKL

1. Quick Ratio (Rs. ‘000)



2009 0.07 0.15


2010 0.07 0.16

2011 0.07 0.2

2012 0.11 0.12

2013 0.11 0.15

20092010

20112012

2013

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

PTC

PMPKL

PTCPMPKL

2. Inventory Turnover (Rs. ‘000)



2009 2.33 1.36

2010 2.46 1.11

2011 2.59 1.33

2012 2.41 1.32

2013 2.18 1.22


20092010

20112012

2013

0

0.5

1

1.5

2

2.5

3

PTC

PMPKL

PTCPMPKL

6. Account Receivables Turnover Years Pakistan

Tobacco Company


2009 94.14 91.44

2010 59.74 52.32

2011 85.44 38.51

2012 85.23 54.26

2013 192.88 63.88

20092010

20112012

2013

0

20

40

60

80

100

120

140

160

180

200

PTC

PMPKL

PTCPMPKL


7. Account Payable Turnover

20092010

20112012

2013

0

5

10

15

20

25

30

35

40

45

PTC

PMPKL

PTCPMPKL

8. Assets Turnover Ratio




2009 19.02 6.97

2010 7.61 7.54

2011 23.05 8.47

2012 43.64 4.66

2013 29.61 5.77



2009 1.77 1.27

2010 1.69 1.04

2011 1.73 1.03

2012 1.86 0.99

2013 1.76 1.12

20092010

20112012

2013

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

PTC

PMPKL

PTCPMPKL

9. Gross Profit Margin

20092010

20112012

2013

0%

5%

10%

15%

20%

25%

30%

35%

40%

PTC

PMPKL

PTCPMPKL




2009 38% 37 %

2010 30% 33 %

2011 27% 25 %

2012 33% 28%

2013 35% 30%

10. Net Profit Margin

20092010

20112012

2013-5%

0%

5%

10%

15%

20%

25%

PTC

PMPKL

PTCPMPKL

11. Return on Assets




2009 21% 7%

2010 7% 4%

2011 3% -4 %

2012 11% -4%

2013 15% 3%



2009 25% 9%

2010 7% 4%

2011 3% -4%

2012 12% -4%

2013 18% 2%

20092010

20112012

2013-5%

0%

5%

10%

15%

20%

25%

PTC

PMPKL

PTCPMPKL

12. Return on Equity

20092010

20112012

2013

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

PTC

PMPKL

PTCPMPKL




2009 42.08% 14%

2010 10.91% 8%

2011 25.68% -7%

2012 70.94% -1%

2013 70.18% 1.8%

13. Debt to Total Assets Ratio

20092010

20112012

2013

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

PTC

PMPKL

PTCPMPKL

14. Debt to Equity Ratio




2009 0.65 0.36

2010 0.71 0.44

2011 0.75 0.46

2012 0.70 0.57

2013 0.69 0.61



2009 1.10 0.55

2010 0.92 0.79

2011 6.61 0.87

2012 3.93 1.31

2013 2.68 1.98

Interpretation of Analysis(PTC VS PMPKL)

Liquidity Ratios

Current Ratio

It has been found that the average current ratio of PTC and PMPKL were 0.886 and 1.742 respectively. As a rule of thumb, the current ratio ideal is 2:1, which mean that a company is in good position. As average current ratio of five years, PTC had 0.886 in current assets for every dollar/rupees of current liabilities, whereas PMPKL had 1.742 in current assets for every dollar/rupees of liabilities. Further, it showed that PMPKL was better than PTC to meet its short term debt obligation from current assets. So, in term of current ratio it can be concluded that financial position of PMPKL was better than PTC. The PMPKL and PTC were given two points and one point, respectively.

Quick Ratio

it has been found that the average quick ratio of PTC and PMPKL were 0.06 and 0.16 respectively. The rule of thumb for quick ratio is that it should be at least 1:1, which mean that a company is able to meet their short term liabilities. As average quick ratio of five years, PTC had 0.06 in liquid assets for every dollar/rupees of current liabilities, whereas PMPKL had 0.16 in liquid assets for every dollar/rupees of current liabilities. This showed very lower ratio, because both the companies were relies too heavily on inventory to meet its obligations. So, in term of quick ratio it can be concluded that financial position of PMPKL was better than PTC. The PMPKL and PTC were given two points and one point, respectively.

Accounts Receivable Turnover

It has been found that the average accounts receivable turnover ratio of PTC and PMPKL were 148.436 and 85.12 respectively. As a rule of thumb, a high accounts receivable turnover ratio is preferred, which indicates that firm’s management is more effective. It also evaluates the


effectiveness of the company in managing its accounts receivable. This study found that as average accounts receivable turnover of five years, PTC had 148 times turned over its receivables, whereas PMPKL had 85 times turned over its receivables during the year. So, in term of accounts receivable turnover ratio it can be concluded that PTC was performing better than PMPKL. The PTC and PMPKL were given two points and one point, respectively

Accounts Payable Turnover

It has been found that the average accounts payable turnover ratio of PTC and PMPKL were 2.592 and 6.68 respectively. As a rule of thumb, the lower accounts payable turnover is preferred, which indicates that the company is taking longer to repay its payables. It also evaluates the effectiveness of the company in managing its payables. This study revealed that as average accounts payable turnover of five years, PTC had 3 times turned over its accounts payable, whereas PMPKL had 7 times turned over its accounts payable during the year. So, in term of accounts payable turnover ratio it can be concluded that PTC was performing better than PTC. The PTC and PMPKL were given two points and one point, respectively.

Inventory Turnover

It has been found that the average inventory turnover ratio of PTC and PMPKL were 2.432 and 1.274 respectively. As a rule of thumb, a high value of inventory turnover is preferred, which indicates the enhancement in performance, whereas a low value of inventory turnover indicates inefficiency in controlling inventory level. This study found that as average inventory turnover of five years, PTC had nearly 3 times turned over its inventory, whereas PMPKL had 1 time turned over its inventory during the year. So, in term of inventory turnover ratio it can be concluded that PTC was performing better than PMPKL. The PTC and PMPKL were given two points and one point, respectively.

Total Assets Turnover

It has been found that the average total assets turnover ratio of PTC and PMPKL were 1.77 and 1.106 respectively. As a rule of thumb, the higher total assets turnover is preferred, which indicates more effective.


It also shows that how efficiently a company uses its total assets to generate revenue. This study revealed that as average total assets turnover of five years, PTC had 2 times turned over its total assets, whereas PMPKL had 1 time turned over its total assets during the year. So, in term of total assets turnover ratio it can be concluded that PTC was performing better than PMPKL. The PTC and PMPKL were given two points and one point, respectively.

Debt to Assets RatioIt has been found that the average debt to asset ratio of PTC and PMPKL were 0.692 and 0.44 respectively. As a rule of thumb, a lower debt ratio is preferred since higher debt ratio means that higher portion of company assets are financed through debts, which indicates higher risk in operations. If a company debt ratio is less than 0.5, most of its assets are financed through equity, whereas if it is greater than 0.5, most of its assets are financed through debts. This study revealed that as average debt to assets ratio of five years, PTC had financed 69% of its assets through debts whereas PMPKL had financed 44% of its assets through debts. So, in term of debt to asset ratio it can be concluded that PMPKL was performing better than PTC. The PMPKL and PTC were given two points and one point, respectively.

Debt to Equity

It has been found that the average debt to equity ratio of PTC and PMPKL were 2.312 and 0.818 respectively. As a rule of thumb, a debt to equity ratio should be 1:1, which means that a company is considered safer. In general, debt should be between 50 to 80 percent of equity. So, in term of debt to equity ratio it can be concluded that PMPKL was performing better than PTC. The PMPKL and PTC were given two points and one point, respectively

Gross Profit Margin

it has been found that the average gross profit ratio of PTC and PMPKL were 0.334 and 0.332 respectively. As a rule of thumb, a higher gross profit is preferred, which mean that a company keeps more on each dollar/rupees of sales to meet its other costs and obligations. The study revealed that as average gross profit margin of five years, PTC had


spent 66% of its sales on cost of goods sold, whereas PMPKL had spent 67% of its sales on cost of goods sold. So, in term of gross profit margin it can be concluded that financial position of PTC was better than PMPKL. The PTC and PMPKL were given two points and one point, respectively.

Net Profit Margin

it has been revealed that the average net profit ratio of PTC and PMPKL were 0.08 and 0.026 respectively. As a rule of thumb, the common range of net profit margin is around 5%, however around 10% is considered more excellent. The study found that as average net profit margin of five years, PTC had net profit of 8% on its sales, whereas PMPKL had net profit of 3% on its sales.

Return on Assets

It has been found that the average return on assets ratio of PTC and PMPKL were 0.142 and 0.034 respectively. As a rule of thumb, a higher return on assets is preferred this indicates that a company has efficient management. The study revealed that as average return on assets of five years, PTC had 14% of return on assets, whereas PMPKL had 3% of return on assets. So, in term of return on assets ratio it can be concluded that financial position of PTC was better than PMPKL. The PTC and PMPKL were given two points and one point, respectively.

Return on Equity

It has been found that the average return on equity ratio of PTC and PMPKL were 0.44 and 0.046 respectively. As a rule of thumb, a higher return on equity is preferred, which indicates that management performance is better. Usually, return on equity measures will be higher than return on assets due to leverage. This study found that as average return on equity of five years, PTC had 44% of return on equity, whereas PMPKL had 5% of return on equity. This indicates that PTC had generated 0.44 of profit for every 1 dollar/rupees of shareholders equity, whereas PMPKL had generated 0.05 of profit for every 1 dollar/rupees of shareholders equity. So, in term of return on equity ratio it can be concluded that financial position of PTC was better than


PMPKL. The PTC and PMPKL were given two points and one point, respectively.

SECTION 5

CONCLUSION

The sample period for this study is from 2009-2013 for 5 years. Four ratios will be used. The data collected is based on secondary data.

During 1Q2013, company’s net revenue and hence profitability increased by 28%YoY and 200% respectively due to hoarding on expectation of increase in government taxes in upcoming budget FY14.

The company is a closely held manufacturing concern with 95% of the ownership held by parent company, British American Tobacco (BAT). With only 5% of the free float available to common stock holders (12.75mn shares only).

Compare the financial performance of PTC and PMPKL through ratio analysis for time period of 2009-2013. Financial performance is a major standard to measure a company operational and financial efficiency. Although analyzing financial performance of PTC and PMPKL, this study was included analysis of liquidity ratios, profitability ratios, activity ratios, leverage ratios and market ratios.

RECOMMENDATIONS Reduction in tobacco wastages must be addressed. Growth of brands and volumes. Productivity enhancement and reduction in stoppages Low brand margins. Low skill level of master technicians


Low education and skill level of employees for advanced machinery

Unstable inventory level because of before time and pending deliveries

Service level of local suppliers for PTC must be improved in order to reduce the problems related to quality.

REFERENCES PTC 2009-2013, Annual Reports.

PMPKL 2009-2013, Annual Reports.

Website:

www.kse.com.pk

www.pakistantobacco.com.pk

www.yespakistan.com

www.pakistanecnomist.com

www.investorguide360.com

www.businessmonitor.com .

www.pmi.com

For further detail contact; [email protected] , [email protected]




http://www.pmi.com/

http://www.businessmonitor.com/

http://www.investorguide360.com/

http://www.pakistanecnomist.com/

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