Liquidity and Leverage Ratio Analysis of Dawood Hercules Fertilizers

FIN619 Final Project on Liquidity and Leverage Ratio Analyses of Dawood Hercules Fertilizers Limited, Fauji Fertilizer Company Limited and Fatima Fertilizer Company Limited in same Industry for the Financial Year 2010, 2011 and 2012.

 

Analysis by:-     Mian Aamir

Year:-                   2013

 

Liquidity and Leverage Ratio analysis trend in Pakistan 

Pakistan is the agriculture country and mostly base on agricultural goods. Due to agricultural country, the roles of fertilizer industries are very important. The main idea of the project is to critically analyze the Liquidity and Leverage Ratio’s Analyses of the fertilizer industries and which company financial health is strong. We also analyses how these companies ability to pay its short term obligations or debts and also get idea of financing or to meet its financial obligations. The main purpose of the project is to evaluate the three companies with same industry financial position for pay its debts.

Liquidity and Leverage Ratio Analysis

This study was performed to see financial methodologies of mentioned companies. Two types of financial ratios called Leverage ratio and liquidity ratios were used.  Leverage ratios are used to show the abilities of a company to meet its obligations. Leverage ratios determine the financial health of an organization by looking at its balance sheet. These mentioned ratios are important for shareholders as they have first claim against the assets of a company.

On the other hand if we look at liquidity ratios then they help determine a firm’s ability to meet its short term debt obligations. A liquidity ratio measures the extent to which a company is capable of paying its short term liabilities or debt when payment time arrives. A high rate of liquidity ratio means that the company is safe and is fully capable of meeting its short term liabilities it is a clear indication of good financial health.

Liquidity and Leverage Ratio Analysis tools

Secondary data was required to complete this study, balance sheet, cash flow statement, liabilities and assets statements were needed for completion of this study hence to fulfill this data requirement need all secondary data like balance sheet and cash flow statements were downloaded from mentioned company’s websites. Excel sheet was used to conduct formula calculations; data was represented in tables and charts. During ratio analysis this study has found some true findings. As per finding, current ratio show that Fauji fertilizer is at top as compare to other two companies.

In other finding, sales to working capital ratio shows that Fauji fertilizer ratio is at top position, Current ratio of Fatima co. is lower than others it should reduce its current liabilities by converting these in assets. As far as Working capital of Fatima co. and Dawood co. are less so they should put try to control their short term debts.

Liquidity and Leverage ratio analysis significance 

This project will help the shareholders, customers, creditors, leasing institution, banks to understand the financial health of the selected companies to pay short and long term debts. It will also help the managers of the each company to compare their performance and financial stability with other companies and will also help to improve their financial.

Liquidity and Leverage Ratio analyses is used by the managers, investors, financial institutions, vendors,  and other stake holders to compare the performance of different companies in the same industry, as well as to see the trends in the company. The Liquidity and Leverage ratios are used by investors to see how well these firms are managing their debt. The leverage ratios shows the how much of the company is financed through debts.

Do you want complete FIN619 final project on Liquidity and leverage ratio analysis of mentioned companies or other?

Complete project on liquidity and leverage ratio analysis for the year 2010,2011,2012 is available. You can get soft copy including complete calculation working (excel sheet) through email.

 

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