FIN619 Project on Profitability ratio analysis free sample
I would like to dedicate my project to my family i.e., my parents, wife and children. My family, in particular my wife has given me tremendous support and encouragements to complete my MBA degree. It was not easy being abroad and while working in a dynamic multinational organization but my wife has made it possible with her extended efforts in taking care of children studies and related matters. She took over all the responsibilities including my part, towards children and kept me spared, only for study during this whole period.
Profitability ratio used to access a firms ability to generate profit as compared to its expensive and other relevant costs incurred during a specific period time. Hence for most of these ratios, having a higher value relative to competitor’s ratio or the same ratio from a previous period is indicative that a company is doing well.
The study has been conducted over the topic of analysis of Profitability ratio at Lucky Cement, Kohat Cement, and Pioneer cement. The main sources for data collection were three company website. Already published data like balance sheets and others financial documents of most recent three years (2008, 2009, 2010) have been used to dig out the result. This study will helped people to get deeper understanding of process of Profitability ratio analysis and readers will able to understand how financial decision have been taken to strength the financial position. Hence for this study comparative income statement, balance sheets have been taken for mentioned ratio analysis. The main theme behind this study was to supplement knowledge to with absolute practical exposure to day to day functions of the sector.
In next coming few pages, readers will be able to study the Profitability ratio analysis of mentioned three companies, data have been presented in tabulation form and in graphically presentation that will enhance the readers understanding which ratios are increasing and decreasing in the particular years.
Table of Content
1.1 Introduction of the Project 10
1.2 Introduction to Lucky Cement 11
1.3 Introduction to Kohat Cement 11
1.4 Introduction to Pioneer Cement 12
1.6 Objective. 13
1.7 1.3 Significance. 13
1.8 Methodology. 14
1.9 Data Collection Sources. 14
1.10 Data Processing & Analysis: 14
Data collection Tools. 15
1.11 Profitability Ratios Analysis. 16
1.12 Summary. 27
1.13 Conclusion.. 28
1.14 RECOMMENDATIONS.. 29
PROJECT PART II. 30
1.15 Bibliography. 31
1.1 Introduction of the Project
This Study is going to conduct over the three company’s Lucky cement, Kohat Cement, and Pioneer cement industry in Pakistan. The main purpose behind this study is to measure the profitability ratio analysis of the said three companies and then do comparison. As we know that profitability ratio measure any company ability to generate earning relatives to sales as well as assets and equity too. On the other hand these all ratios assess the ability of a company to generate profits, earnings and cash flows relative to some metric, often the amount of money invested. This ratio might help to measures both returns on the investor money in the company and the firm’s margins too. Financial expert used Profitability ratio to evaluate the profitability of a company and it is vital to measure the performance of the company. We can also use profitability ratio to determine the profit earned by company relatives to its sales, net worth and total assets.
So the reason for selecting this topic is to analyze and determine the company bottom line. So for all these analysis I have selected Lucky Cement, Kohat Cement and Pioneer Cement for analysis and comparison. In my project I have measured said companies overall efficiency and performance through doing financial ratio analysis of mentioned three companies. All these analysis have done through these companies balance sheet. With help of ratio analysis, comparison of profitability financial soundness can be made between one company and other companies in the same industry so for this comparison three companies have been selected for this financial analysis.
At the end of the project on Profitability ratio, readers will able to understand:
- Ability to understand which company is performing well to generate profit
- Ability to understand how these companies are managing their asset and debt
- Help the company’s management to study the position of their firms in respect of sales expenses, profitability and using capital.
- Become simple to understand various figures in the financial statement through the use of Profitability ratios
- It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc.
1.1 Profitability Ratios Analysis
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Ratio analysis is vital technique of financial analysis; it is a mean for judging the financial health of a business enterprise and it determine and interprets the profitability ratio of business enterprise. Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. However, such a comparison only provide glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions, management policies, etc. may affect the future operations.
The study has been conducted over the three companies for profitability ratio analysis purpose. Data has been collected from three companies’ websites through using internet as tools. All secondary data related to mentioned companies financial documents have been taken for profitability ratio analysis purpose. Hence in study only secondary data have been used to find out the required study objectives. All study objectives have been achieved successfully by doing profitability ratio analysis of three firms. For the sake of these analysis, study has used excel sheet by putting necessary formula in order to calculate the required ratio. Data has been presented in tabulation and in graphically mode for better understanding, hence data was processed and analyzed on excel sheet for ratio analysis.
Table 1.1 is presenting the Gross profit margin ratio analysis of three mentioned companies. The main purpose of calculating for this ratio was to know how much profit remains out of each dollar of sales, Hence to find out the facts that how three companies efficiently produces its products. We can see table is presenting true and visible result of finding. Table 1.2 is presenting Net profit Margin ratio analysis of three companies. The main purpose was to investigate the profit of three companies for every dollar of the revenue earned.
The other secondary aim was to know how three companies’ managers and operations of these companies are performing. Hence the result has been found and data was presented in tabulation form for clear understanding. Table 1.3 is presenting Return on Asset ratio finding, Hence data was presented in tabulation form and in graph form for better underrating the comparison. Table 1.4 has developed to show DuPont Return on asset, here I measured three companies said ratios, we can see table is presenting three companies finding ratio with graph. Hence all the required ratios have been presented in tabulation form and with graph. Each table is presenting mentioned three companies ratio with graph. Similarly other tables are elaborating relevant ratio analysis, we can consult relevant portion for clear understanding.