ACC501 Business Finance assignment no 1 spring fall 2011

[Vuhelper]

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RATIO ANALYSIS
The Crescent Textile Mills Ltd. (Crestex) is one of the leading public limited companies incorporated
under the Companies Ordinance 1984. Its shares are quoted on all the Stock Exchanges in Pakistan. The
Crestex is engaged in business of textile manufacturing comprising of made ups, processed fabric, greige
fabric and yarn made from raw cotton and synthetic fiber(s). Crestex also operates a cold storage and a
power generation house. The financial statements of the company reveal that it is one of the financially
viable companies of the textile industry in Pakistan.
Q1. Using the audited financial statements with accompanying information for the year ended
June 30, 2010 provided in the Annual Report 2010 of The Crescent Textile Mills, you are
required to conduct “Time-series Analysis” of solvency measures of the company by
computing and interpreting the results of the following ratios for the years 2009 & 2010:
􀂃 Total Debt Ratio
􀂃 Debt-Equity Ratio
􀂃 Times Interest Earned (TIE) Ratio
Note:
“Time series Analysis” refers to the analysis of ratios of the same company for different time
periods. Interpretations carry reasonable marks so they should not only be based upon
individual figures but also on the comparison of the ratios for both years.
Similarly, Kohinoor Textile Mills Ltd. (KTML) is one of the leading companies in the same business
sector and having close competition with Crestex.
Q2. Using the audited financial statements with accompanying information for the year ended
June 30, 2010 provided in the Annual Reports 2010 of The Crescent Textile Mills and Kohinoor
Textile Mills, you are required to conduct “Cross company Analysis” of liquidity measures of
the companies by computing and interpreting the results of the following ratios for Crestex &
KTML for the year 2010 only:
􀂃 Current Ratio
􀂃 Quick Ratio (Acid-test Ratio)
􀂃 Cash Ratio

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[Vuhelper]

UESTION # 01
In this question you are required to make time series analysis for Crestex company for the years 2009 and 2010
Calculate the three ratios by applying following formulae for both years 2009 and 2010 separately and then compare which year was more profitable for the company by interpreting the equation


Total debt ratio = Total assets – Total equity / Total assets



Debt-equity ratio = Total Debt / Total equity


Interest coverage ratio = Earning before interest and taxes / Interest


From the data extracted from Balance sheet in annual reports of Crestex:

Total equity is (2010=2,672,439) (2009=2,261,837)

Total Assets are (2010=10,988,698 ) (2009=10,815,934)

Interest is (2010= ----) (2009= 22081)

Earning before interest and taxes (2010=463,491) (2009=238,518 )

Current liabilities (2010=6,010,688 ) (2009=5,805,685)

Current Assets (2010=4,202,903) (2009=4,085,672)

Inventory (2010=1,047,150) (2009=940,421)

Cash(2010=16,619) (2009=18,931)


QUESTION # 02


In this question you have to make cross company analysis for both the companies calculate following ratios for both companies

Current Ratio= current assets / Current liabilities



Quick (acid test) ratio = current assets – inventory / Current liabilities



Cash ratio= Cash /Current liabilities


Use above data for Crestex and following is the data for KTM

From the data extracted from Balance sheet in annual reports of KTM:

Current liabilities are (2010=8,169,138 ) (2009=6,672,527)

Current Assets are (2010=5,903,185) (2009=4,530,22)

Inventory is (2010=2,393,113) (2009=1,779,826)

Cash (2010=78,851) (2009=80,297)


After calculating the ratios show which company is in better condition by showing current financial position

[aroojzg]

hellooooo friends....

As Interest coverage ratio = Earning before interest and taxes / Interest
we have Earning before interest and taxes in 2010 but we dnt have Interest..... so how we will calculate this?

[Vuhelper]

[aroojzg]

i knw this but how to Calculate Interest in 2010

[rabeel]

Oh shukar hai is ka kuch tu aya.. Jan chut gai.

[Bushra Akram]

AOA! anyone can tell how can interpretation it???????????????????

[rabeel]

you may start so we will try to guide it.

[Mehru Here]

Cant we have this assignment completely,properly solved once and for all. I dont understand a thing that is being pasted here..sorryyy

[rabeel]

why not g? whats the problem