FIN619 Final Project on Profitability Ratio Analysis of Lucky Cement,Kohat Cement,PIONEER Cement 2011,2012,2013
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.
I am grateful to Almighty Allah who has given me the ability and wisdom to realize the importance of knowledge and continuous learning. With the blessings of Almighty Allah, I have enjoyed a continuous growth in my career and personal life.
After that I am thankful to my company (Schlumberger) who being a multinational organization developed a culture of encouragements and facilitation to its employees for personal development and further studies. I am appreciative to my managers (Scott Bittner and Ziad Abounohra), who have always been supportive, especially for consistently & willingly approving my leaves for studies & exams.
I am also thankful to Virtual University of Pakistan for eradicating traditional blockades & boundaries for Pakistani knowledge seekers. Within all limitations and odds, VU is one of the best institutions of Pakistan and doing enormous contribution to the nation building/development in an exceptional way. I am proud to be a cyberian.
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 (2011, 2012, 2013) 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.
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.
According to above analysis finding, we can see that Lucky cement gross profit margin ratio is increasing as compare to other two companies. It means Lucky cement have effective control on its cost while producing sales. Decreasing trend of other both companies are indicating that both Kohat and Pioneer cement industries have less control while generating sales
Gross profit margin ratio of Lucky, Kohat and Pioneer cement has fluctuating trend year after year. These three cements companies show a declining and little bit increasing over 2008 to 2010. This decreasing trend raising a concern for both of three companies as they are incur increasing level of price and high cost of production such as finish goods, opening and closing and under and over valuation of cement stock. These companies performance regarding each other is look like same but an industry set benchmark help in further elaboration of their performance according to cement industry sector.
As per above analysis we can see that Net profit margin of Lucky cement is increasing as compare to other two companies. The main reason is that net profit out of each dollar of sales has become larger or greater,
The higher net profit margin ratio better sign of performance..Net Profit ratio reflects the profitability of the firm. Increases/decreases in net profit ratio indicate a change in profit. These three companies deteriorate in its position over 2008 to 2010.But Lucky cement profit margin looks better as compare to other two cement companies. Profit margin reflects the healthy performance of company regarding its effective investment planning and strategies and show company ability to earning the profit through meeting sale expectations in cement market.
Project for FIN619 on Profitability Ratio analysis on mentioned companies is available.