Pakistan Synthetic Limited

Financial Statement Analysis 2009-13

Ahmad Mukhtar 11U0050
3/27/2014

Table of Contents
Executive Summary....................................................................................................................................... 2
Income Statement ........................................................................................................................................ 3
Balance Sheet................................................................................................................................................ 4
Cash Flow Statement .................................................................................................................................... 6
Common Sized Income Statement................................................................................................................ 8
Common Sized Balance Sheet ....................................................................................................................... 9
Trend Index ................................................................................................................................................. 11
Per Share Results ........................................................................................................................................ 12
Cash Flow Ratios ......................................................................................................................................... 13
Short term Liquidity Analysis ...................................................................................................................... 14
Common Size Analysis of CA & CL............................................................................................................... 16
Capital Structures and Solvency Ratios....................................................................................................... 18
Return on Invested Capital Ratios............................................................................................................... 20
Asset Utilization Ratios ............................................................................................................................... 21
Analysis of Profit Margin Ratios .................................................................................................................. 22
Analysis of Depreciation ............................................................................................................................. 23
Analysis of Discretionary Expenditures....................................................................................................... 24
Market Measures ........................................................................................................................................ 25
Conclusion ................................................................................................................................................... 26

Executive Summary
In this project the financial statement analysis of the company Pakistan Synthetic Limited has been
carried out for the fiscal years 2009-2013. PSL is a quality manufacturer of polyester staple fibre and
plastic and crown caps. It has the responsibility to treat all stakeholders equitably and transparently to be
true to their trust.

The solvency of the company has been analyzed in detail with the help of certain tables below.
Some of which are the liquidity, solvency and profitability tables of the company.
The performance of the company has generally been good over the years with its net sales constantly
increasing to meet demand. The aim of this project is to see how PSL has financed and operations and
how well it has done so in dealing with rising costs. The transition from being an equity based to a debt
financed company will be analyzed in detail during the course of this project.

Income Statement

(Rupees in '000)

Pakistan Synthetic Limited

Profit and Loss Accounts
For years ended June 2009 through 2013
2013
2012
2011

Net sales
Cost of sales
Gross profit
Other income

Profit from operations

Finance costs
Profit before taxation
Taxation
Profit for the year

5,123,546
(4,812,637)
310,909
13,948
324,857
(45,060)
(36,330)
(60,030)
(141,420)
183,437
(116,394)
67,043
(23,147)
43,896

4,397,083
(4,174,499)
222,584
19,864
242,448
(25,884)
(30,443)
(53,797)
(110,124)
132,324
(91,887)
40,437
(21,890)
18,547

4,154,303
(3,567,817)
586,486
21,097
607,583
(17,048)
(70,237)
(70,302)
(157,587)
449,996
(9,417)
440,579
(154,275)
286,304

Earnings per share - basic and diluted

0.78

0.33

5.11

Distribution and selling costs

Administration and general expenses
Other operating expenses

2010

2009

3,280,755 2,452,646
(3,133,503) (2,310,990)
147,252 141,656
9,870 9,120
157,122 150,776
(11,809) (10,890)
(51,089) (39,875)
(10,611) (17,933)
(73,509) 68,698
83,613 82,078
(7,033) (19,255)
76,850 62,823
(24,759) (20,492)
51,821 42,331
0.92

0.76

PSLs income statement shows that from 2009 to 2011 the growth in sales has led to higher net
income. Net income however falls significantly after 2011 even though sales continue to rise.
The main reason for this is the rise in cost of sales leading to lower gross profit and higher
operating expenses and finance costs leading to low levels of EBT. The income statement clearly
shows that the company was performing at its best in 2011 with the highest net income of
286,304,000 and an EPS of 5.11

Balance Sheet
Pakistan Synthetic Limited
Balance Sheet
For year 2009 through 2013
2013
2012

(Rupees in '000)
Equity and liabilities
Shareholders'
Shareholder's equity
Equity
Authorised capital of 70,000,000 ordinary
shares of Rs. 10 each
Issued, subscribed and paid-up capital
General reserve
Unappropriated profit
Total shareholders' equity
Liabilities
Non-current liabilities
Staff retirement benefits
Deferred taxation
Long term finance
Total non-current liabilities
Current liabilities
Trade and other payables
Short-term borrowings
Accrued markup
Current portion of long term finance
Total current liabilities
Contingency and Commitments
Total equity and liabilities

2011

2010

2009

700,000

700,000

700,000

700,000

700,000

560,400
292,450
264,399
1,117,249

560,400
292,450
220,503
1,073,353

560,400
292,450
314,036
1,166,886

560,400
292,450
27,732
880,582

560,400
362.500
(24,089)
898,611

29,891
88,663
281,250
399,804

28,746
111,074
406,250
546,070

25,617
89,184

26,0931

30,602
7,296

114,801

26,091

37,898

876,376
565,361
17,302
125,000
1,584,039

553,712
735,310
7,350
93,750
1,390,122

271,979 369,250
1,088,371
2,382
47,942

307,009
41,215
11,233

1,362,732 917,192

365,457

3,101,092 3,009,545 2,644,419 1,323,867

1,302,166

Assets
assets
Non-current Assets
Property, plant and equipment
Long term loan to employees
Long term deposits
Deferred Taxation
Total non-current assets
Current assets
Stores and spares
Stock-in-trade
Trade debts
Loans and advances
Short term deposits and prepayments
Other receivables
Taxation - net
Cash and bank balances
Total current assets
Total assets

1,035,139 1,186,323 1,154,708 293,070

375
738
186
901
924
924
924
262
21,279
1,036,438 1,187,985 1,155,818 315,552

360,693
1,460
262

205,989
993,620
709,049
3,686
1,470
14,700
48,743
87,397
2,064,654
3,101,092

28,272

113,725
326,747
332,029
713
1,145
44,377

173,384
1,008,315
1,323,867

121,015
939,751
1,302,166

151,628
836,101
578,112
5,182
1,527
48,354
39,201
161,455
1,821,560
3,009,545

154,554
526,186
337,851
3,613
17
75,932
1,521
388,927
1,488,601
2,644,419

125,833
308,111
370,896
3,820

362,415

PSLs balance sheet shows an increase in owners equity from 2009 to 2011 after which it
remains about the same till 2013. The rise in equity was mainly due to the increase in
unappropriated profit during these years.
The non-current liabilities portion has grown till 2012 where it is at its highest of 546,070
compared to the initial 37,898. The main contributor to this increase was the introduction of long
term finance in 2012 which was also present in 2013 but by a smaller amount. Current liabilities
show an increasing trend throughout the period being highest in 2013 and lowest in 2009.
Total Assets tend to be rising throughout the 5 year period which shows PSLs growth as a
company. Both current and non-current assets have risen to contribute to this growth. In the noncurrent assets portion Property plant and equipment has grown by over 280% over the 5 years. In
current assets there has been a significant rise in stores and spares and inventory throughout, with
cash and bank balances only increasing till 2011 and then falling from 2012 to 2013.

Cash Flow Statement

(Rupees in '000)

Pakistan Synthetic Limited

Statement of Cash Flows
For year 2009 through 2013
2013
2012

2011

2010

2009

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation

Adjustments for:
Depreciation
Charge for staff gratuity
Profit on disposal of property, plant and equipment
Profit on saving and deposit accounts
Finance costs
Advances written off
Provision for doubtful debts and deposits
Movement in:
Working capital
Long term deposits
Long term loan to employees
Net cash from operations
Staff gratuity paid
Financial charges paid
Taxes paid
Net cash from / (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVMES
Capital expenditures paid
Proceeds from disposal of property, plant and equipment
Profit on saving accounts received
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Long term diminishing musharka (paid) / obtained
Short term foreign currency loan and money market loan
paid-net of loans obtained
Dividend paid
Net cash (used in) / from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
CASH AND CASH EQUIVALENTS COMPRISE
Cash and bank balances
Short term borrowings
Running finance under mark-up arrangement

67,043

40,437

440,579

76,580

62,823

158,116
7,712
(63)
(2,242)
116,394
364
1,300
348,624

150,300
7,706
(3,335)
(6,457)
91,887

129,350
5,733
(200)
(20,554)
9,417

103,427
6,156
(96)
(6,076)
19,255

436
280,974

39,355
603,680

108,199
7,201
(167)
(9,538)
7,033
3,503
23,998
216,809

13,399

(242,100)

18,241

363
362,386
(6,567)
(106,442)
(55,100)
194,277

(552)
38,322
(4,577)
(86,919)
(37,680)
(90,854)

(421,061)
(622)
755
182,712
(6,209)
(7,035)
(97,550)
71,918

519
235,569
(11,710)
(7,128)
(22,625)
194,106

187,266
8,309
4
388,059
(3,131)
(24,916)
(11,719)
348,293

(6,932)
63
2,242
(4,627)

(185,042)
6,462
6,457
(172,123)

(965,451)
200
20,554
(944,697)

(41,081)
673
9,538
(30,870)

(39,405)
1,116
6,076
(32,213)

(93,750)
(269,733)

500,000
(353,061)

(9)
(363,492)
(173,842)
161,455
(12,387)

(111,434)
35,505
(227,472)
388,927
161,455

(49)
(49)
(872,828)
173,384
(699,444)

(69,652)
(69,652) 67,213
93,584 248,867
79,800
(169,067)
173,384
79,800

87,397

161,455

388,927
(1,088,371)

173,384

(99,784)
(12,387)

161,455

699,444

6,993
192,480

(67,213)

173,384

121,015
(41,215)
79,800

The cash flow from operating activities shows a decreasing trend form 2009 to 2012 when it
reaches an all time low of -90,845 (outflow of cash). However in 2013 the downward trend ends
as the cash flow from operating activities goes back up to 194,277 increasing by 285,122 in 1
year.
Investing activities show cash outflow throughout the 5 years with the highest amount of cash
being used up in 2011 and lowest in 2013. The high amount being paid out in 2011 was due to
the high capital expenditures during this time period.
Financing activities show inflow of cash only during 2009 and 2012. The highest amount of cash
used up was in 2013 when 363,492 were used up for financing activities.

Common Sized Income Statement

Net sales
Cost of sales
Gross profit
Other income
Distribution and selling
costs
Administration and general
expenses
Other operating expenses
Profit from operations
Finance costs
Profit before taxation
Taxation
Profit for the year

Pakistan Synthetic Limited

Common-size Income Statements
For years ended June 2009 through 2013
2013
2012
2011
2010
2009
%
%
%
%
%
100
100
100
100
100
-93.9318 -94.9379 -85.8824 -95.5116 -94.2244
6.068239 5.062083 14.11755 4.488357 5.77564
0.272233 0.451754 0.507835 0.300845 0.371843
6.340472 5.513837 14.62539 4.789202 6.147483
-0.87947 -0.58866 -0.41037 -0.35995 -0.44401
-0.70908
-1.17165
-2.7602
3.580274
-2.27175
1.308527
-0.45178
0.85675

-0.69235
-1.22347
-2.50448
3.009359
-2.08973
0.919632
-0.49783
0.421802

-1.6907
-1.69227
-3.79334
10.83205
-0.22668
10.60537
-3.71362
6.891746

-1.55723
-0.32343
-2.24061
2.54859
-0.21437
2.342449
-0.75467
1.579545

-1.6258
-0.73117
2.800975
3.346508
-0.78507
2.561438
-0.83551
1.725932

Looking at the common-sized income statements we can see that cost of sales remain the highest
proportion of net income in all years, being the highest (95%) in 2010 and lowest (85%) in 2011
and fluctuating between these values in the remaining years. Cost of sales being the lowest in
2011 as a percentage of sales is what contributes to the high net income of this year. EBT and
Tax expense is also highest for 2011 due to the same reason, with EBT being 10% of sales and
tax 3.7%. Finance costs increased over the years as a percentage of sales and so did the operating
expenses, being highest in 2013.

Common Sized Balance Sheet

Equity and liabilities

Shareholders' Equity
equity
Shareholder's
Authorised capital of 70,000,000
ordinary shares of Rs. 10 each
Issued, subscribed and paid-up
capital
General reserve
Unappropriated profit
Total shareholders' equity
Liabilities
Non-current liabilities
Staff retirement benefits
Deferred taxation
Long term finance
Total non-current liabilities
Current liabilities
Trade and other payables
Short-term borrowings
Accrued markup
Current portion of long term finance
Total current liabilities
Contingency and Commitments
Total equity and liabilities

Pakistan Synthetic Limited

Common-size Balance Sheets
For years ended June 2009 through 2013
2013
2012
2011
2010
2009
%
%
%
%
%

22.57269 23.25933 26.47084 52.875402 53.75659

18.07105
9.430549
8.525997
36.0276

18.62075 21.1918 42.330536 43.03599

9.717416 11.05914 22.090588 0.027838
7.326789 11.87543 2.0947724 -1.84992
35.66496 44.12637 66.515896 69.00894

0.963886 0.955161 0.968719 19.709759 2.350084

2.85909 3.690724 3.372537 1.6073367 0.560297
9.069386 13.49872
0
0
0
12.89236 18.1446 4.341256 1.9708173 2.910382
28.26024 18.39853 10.28502 27.891775 23.57679
18.23103 24.4326 41.15728
0 3.165111
0.557932 0.244223 0.090076 3.6213608 0.86264
4.030838 3.115089
0
51.08004 46.19044 51.53238
100

100

100

0
0
69.28128 28.06532
100

100

Assets
assets
Non-current Assets
Property, plant and equipment
Long term loan to employees
Long term deposits
Total non-current assets
Current assets
Stores and spares
Stock-in-trade
Trade debts
Loans and advances
Short term deposits and
prepayments
Other receivables
Taxation - net
Cash and bank balances
Total current assets
Total assets

33.37982 39.41868 43.66585 22.13742 27.69946

0.012093 0.024522 0.007034 0.0680582 0.112121
0.029796 0.030702 0.034942 0.0197905 0.02012
33.42171 39.47391 43.70782 23.835627 27.83171
6.642467
32.04097
22.86449
0.118861

5.038237 5.844535 9.5049578 8.733526

27.78164 19.89798 23.273561 25.09258
19.20928
12.776 28.016107 25.49821
0.172185 0.136627 0.2885486 0.054755

0.047403
0.474027
1.571801
2.818265
66.57829
100

0.050739
1.606688
1.302556
5.364764
60.52609
100

0.000643
0 0.08793
2.871406 2.135562 3.407937
0.057517
0
0
14.70747 13.096784 9.293362
56.29218 76.164373 72.16829
100
100
100

The equity and liabilities portion of this common-size analysis shows us that that over the 5 years
shareholders equity keeps decreasing as a percentage of total liabilities and equity, being 69% in
2009 and just 36% in 2013. The non-current liabilities, though a much smaller percentage of
total equity and liabilities, has shown significant increase over the years being as much as 18% in
2012.The increase in the percentage of current liabilities shows us that PSL has chosen to replace
equity with current liabilities as it makes for the majority proportion of the total liabilities and
equity in recent years, and this is due to the significant increase in short term borrowings over the
years.
Common size analysis of the assets section of the balance sheet shows us that current assets
make up for a larger percentage of total assets in all years. However, there has been significant
increase in the percentage of non-current assets till 2011 where it is as high as 43.7% of total
assets, (due to a drastic increase in property, plant and equipment) after which it falls again
slightly for the next 2 years.

Trend Index

Pakistan Synthetic Limited

Trend Index of Selected Accounts (2009=100%)
2013
2012
2011
Cash and bank balances
72%
133%
321%
Trade debts
214%
174%
102%
Stock-in-trade
304%
256%
161%
220%
194%
158%
Total current assets
Total current liabilities
433%
380%
373%
Working Capital
84%
75%
22%
Property, plant and equipment
287%
329%
320%
1055%
1441%
303%
Total non-current liabilities
Total liabilities
492%
480%
366%
Total shareholders' equity
124%
119%
130%
Net sales
209%
179%
169%
Cost of sales
208%
181%
154%
Administration and general expenses
Finance costs
Total cost and expenses
Profit before taxation
Profit for the year

91%
604%
206%
107%
104%

76%
477%
160%
64%
44%

176%
49%
229%
701%
676%

2010
2009
143% 121,015
112% 332,029
94% 326,747
107% 939,751
251% 365,457
16% 5,875.00
81% 360,693
69%
37,898
234% 403,355
98% 898,611
134% 2,452,646
136% 2,310,990
128%
37%
107%
122%
122%

(39,875)
(19,255)
68,698
62,823
42,331

In the trend index we take 2009 as the base year to keep its values as benchmark for PSLs
performance in later years. The most significant increase over the years has been in the noncurrent liabilities which have increased by over a 1000% in 2012 and 2013 as compared to 2009.
Trade debts have significantly increased and so have the total liabilities and stock in trade.
Positive signs for PSL are the increase in current assets and net sales and the decrease in
administrative and general expenses. Working capital shows an increasing trend since 2010 but
in comparison to 2009 base year value it is still lower than the starting point. Negative signs
include drastically rising finance costs and cost of sales is also increasing over the years.

Per Share Results

Sales
Net income
Dividends
Book value
Average shares outstanding

Pakistan Synthetic Limited

Per share results
2013
2012
2011
2010
2009
91.43
78.46
74.13
58.54
43.77
0.78
0.33
5.11
0.92
0.76
0.00
1.99
0.00
1.24
0.00
19.94
19.15
20.82
15.71
16.04
56,040,000 56,040,000
56,040,000 56,040,000 56,040,000

Per share results can help us analyze the financial health of PSL from the investors point of
view. Average shares outstanding are the same for each year which helps make comparisons
simpler. Sales per share shows a significant increase throughout the year being the highest (91.43
rupees per share) in 2013 as compared to 43.77 in 2009. The Net income per share (EPS)
fluctuates massively in 2011 when it goes to a record high of 5.11 per share. In the last 2 years
however it has come back to its average value of around 0.7 per share. The per share dividends
only have significant values in 2010 and 2012. In the other years dividends were either not paid
out or too low to give a significant DPS value. This is not necessarily a bad sign for investors as
PSL probably retains its earnings for growth prospects in these years. The book value per share
increases from 2009 to 2011 after which it falls but not too significantly.

Cash Flow Ratios

Pakistan Synthetic Limited
Analysis of Cash Flow Ratios (Rupees in '000)
Cash Flow Adequacy Ratio(5 years)

Cash Reinvestment Ratio

Industry avg.
8.262

0.35
2013
5.20%

2012
-0.56%

2011
3.10%

2010
4.70%

2009
13.57%

2.338

The company has a cash flow adequacy ratio of 0.35 and is much below the industry average.
This means that companys operations do not produce sufficient cash to meet necessary business
obligations. This also shows how the company cannot cover the annual payments of all the longterm annual debt with the cash flow from its operating activities.
Cash reinvestment ratio shows a decreasing trend till 2012 after which it picks up and goes to
5.2% in 2013 after being negative in 2012. This means that the company should be reinvesting
more and should not hold back earnings. 2012 has however been the worst year with a negative
ratio contrary to a higher net income comparatively. By reinvesting profits the company will get
to compound your investment and over time create substantially higher returns.

Short term Liquidity Analysis

Pakistan Synthetic Limited
Short-term Liquidity Analysis
2013
2012
2011
Current Ratio
1.30
1.31
1.09
Acid-test Ratio
0.68
0.71
0.71
Accounts Rec. Turnover
7.96
6.46
11.72
Inventory Turnover
5.26
3.80
8.57
Days Sales in Receivables
45.22
55.77
30.71
Days Sales in Inventory
68.43
94.79
41.99
Approx Conversion Period
113.65
150.56
72.70
Cash to Current Assets
4.23%
8.86%
26.13%
Cash to Current Liabilities
5.52%
11.61%
28.54%
Working Capital
480,615 431,438 125,869
Days Purchases in Accounts Payable78.12
51.81
30.71
Average Net Trade Cycle
35.54
98.75
41.98
Cash provided by operations to average
13.06%current
-6.60%
liabilities 6.31%

2010
1.10
0.76
9.33
9.90
38.57
36.35
74.92
17.20%
18.90%
91,123
50.01
24.91
30.27%

2009 Industry avg.

2.57 1.110892414
1.67 0.529191957
7.12 9.895856531
4.58 4.534805139
50.53 88.73730311
78.66 80.4192092
129.20 169.1565123
12.88%
11.05%
33.11%
12.23%
574,294 -1080773974
70.99 42.74891431
58.20 126.407598
61.88%
19.61%

Short term liquidity analysis shows us that current ratio is highest in 2009 and then is lower in
the coming years. This is due to the current liabilities increasing at a greater rate than current
assets for PSL. Even though the current ratio falls it remains above the industry average in most
years and almost equal to the industry average in 2010 and 2011. This is a good sign as it shows
that PSL is more liquid and has its current liabilities covered better than other firms in the
industry.
The acid test ratio also falls over the years but still remains above the industry average of 0.53
for all years signifying that PSL has a better proportion of quick assets than other firms.
PSL also has a lower accounts receivable turnover than the industry average for all years except
for 2011. This is not a healthy sign as it shows that PSLs accounts are cleared slower than the
other firms in the industry. Inventory turnover however shows positivity as it is higher than the
industry average for most years. This shows that PSLs sales are rising by more than its
inventories compared with other firms.
Approximate conversion period is the sum of the days sales in receivables and days sales in
inventories. PSL has a lower conversion period than the industry average in all years showing

that it is more efficient in its sales and collection of receivable process than other firms in the
industry.
The ratios for cash show a worrying sign in the recent years as they fall below industry average
even after doing well in earlier years. This shows that PSL has a lower cash to current
assets/liabilities ratio than other firms in the industry.

Common Size Analysis of CA & CL

Pakistan Synthetic Limited
Common-size Analysis of Current Assets and Current Liabilities
2013
2012
2011
Current assets
Stores and spares
9.98%
8.32%
10.38%
Stock-in-trade
48.13%
45.90%
35.35%
Trade debts
34.34%
31.74%
22.70%
Loans and advances
0.18%
0.28%
0.24%
Short term deposits and prepayments
0.07%
0.08%
0.00%
Other receivables
0.71%
2.65%
5.10%
Taxation - net
2.36%
2.15%
0.10%
Cash and bank balances
4.23%
8.86%
26.13%
Total current assets
100.00%
100.00%
100.00%

2010

2009

12.48%
30.56%
36.78%
0.38%
0.00%
2.80%
0.00%
17.20%
100.00%

12.10%
34.77%
35.33%
0.08%
0.12%
4.72%
0.00%
12.88%
100.00%

Current liabilities
Trade and other payables
Short-term borrowings
Accrued markup
Current portion of long term finance
Total current liabilities

40.26%
0.00%
5.23%
0.00%
100.00%

84.01%
11.28%
3.07%
0.00%
100.00%

55.33%
35.69%
1.09%
7.89%
100.00%

39.83%
52.90%
0.53%
6.74%
100.00%

19.96%
79.87%
0.17%
0.00%
100.00%

This analysis takes into consideration current assets and current liabilities separately in a
common-sized statement to study the impact of their individual components. Looking at current
assets first we can see that the major chunk comes from stock in trade (inventories), which make
up for about 48% of total current assets in 2013 which is a significant increase from the 34% in
2009. Second largest component is trade debts (accounts receivable) which is 34% similar to its
value in 2009 with some fluctuations in between. Cash and bank balances shows an interesting
trend as its percentage to total current assets increases till 2011 (26.13% highest) and then falls
sharply in the next two years to just 4.23% of current assets which means PSL has less cash
available.

Looking at current liabilities we see that starting off in 2009 the liabilities are dominated by trade
and other payables which make up for 84% but in later years this percentage drops mainly due to
the introduction of short term borrowings which are highest in 2011 and go down in the next 2
years. Current portion of long term finance also increases making up for 7.9% of the total current
liabilities in 2013.

Capital Structures and Solvency Ratios

Pakistan Synthetic Limited
Capital Structures and Solvency Ratios
2013
2012
2011
Total debt to equity
1.78
1.80
1.27
Total debt rato
0.64
0.64
0.56
Long term debt to equity
0.36
0.51
0.10
Equity to total debt
0.56
0.55
0.79
Fixed assets to equity
0.52
0.61
0.78
Current liabities to total liabilities
0.80
0.72
0.92
Earnings to fixed charges
1.58
1.44
47.79
Cash flow to fixed charges
1.67
0.99
7.64

2010
1.07
0.71
0.03
0.93
0.31
0.97
11.89
27.60

2009 Industry avg.

0.45 5.638641
0.31 0.79443
0.04 0.83287
2.23 8.029504
0.89 4.310872
0.91 1.170682
4.26 -6.80432
18.09 3.203375

Total debt to equity ratio for PSL shows an increasing trend throughout the year being highest in
the last 2 years at around 1.79. This value shows that PSLs operations are majorly debt financed
but still this value is a lot lower than the industry average of 5.64 showing that other firms in the
industry have used a greater degree of debt financing than PSL.
Total debt ratio for PSL increases initially before becoming constant at 0.64 in the last 2 years,
showing that the total debt can be financed by 64% of the total assets. This value is less than the
industry which is a good thing because it means that the other firms need more assets to finance
their debts than PSL.
Long term debt ratio is also lower than the industry average for all years even though it increases
over the years. Equity to total debt ratio decreased over the years showing that PSL is moving
towards a higher degree of debt financing.
Fixed assets to equity is below 1 for all years showing that all of the fixed assets can be financed
by the equity. This is much lower than the industry average of 4.3 showing that other firms in the
industry have 4 times as much fixed asset as their equity.

Current liabilities to total liabilities ratio is also less than 1 for all years showing that non-current
liabilities are greater than current liabilities in all years for PSL unlike the industry.

Return on Invested Capital Ratios

Pakistan Synthetic Limited
Return on Invested Capital Ratios
2013
2012
Return on net operating assets
5.68%
2.63%
Return on common equity
3.93%
1.73%
Return on long term debt and equity
7.88%
3.76%
Equity growth rate
3.93% -8.65%
Disaggregation of ROCE
0.28% -2.89%
Disaggregation of RNOA
5.68%
2.63%

2011
12.95%
24.54%
22.82%
24.53%
24.25%
12.95%

2010
8.42%
5.88%
6.24%
-2.02%
8.08%
8.42%

2009 Industry avg.

5.77% 0.499669
4.71% 2.734701
5.90% 3.921258
4.71% -6.03136
3.96% 1.528344
5.77% 0.257551

RNOA shows an increasing trend for the first three years after which it falls, being highest in
2011 at 12.95%. This was because NOPAT was highest for PSL during this time period. ROCE
shows a very similar trend as net income followed the same trend as NOPAT during the years.
Compared to industry averages both returns are much low signifying that PSL is getting less
return on operating assets and common equity than other firms in the same industry.

Asset Utilization Ratios

Pakistan Synthetic Limited

Asset Utilization Ratios
2013
2012
2011
Sales to cash equivalents
58.62
27.23
10.68
Sales to receivables
7.23
7.61
12.30
Sales to inventories
5.16
5.26
7.90
Sales to working capital
10.66
10.19
33.00
Sales to fixed assets
4.95
3.71
3.60
Sales to total assets
1.65
1.46
1.57
Sales to short term liabilities
3.23
3.16
3.05

2010
18.92
8.85
10.65
36.00
11.19
2.48
3.58

2009 Industry avg

20.27 744.6546
7.39 34.14936
7.51 5.571425
4.27 13.96539
6.80 3.228689
1.88 1.284799
6.71 3.056425

Sales to cash equivalents shows an overall upward trend throughout the years. However, the ratio
is very low as compared to the industry average. This means that the cash and equivalents were
not translated into enough sales in that year. Sales to receivables is also low compared to the
industry average in all years, meaning that receivables are a bigger proportion of sales for PSL
compared to other firms which is not a good sign.
Sales to inventories ratio shows a good sign till 2011 when it is above the industry average which
meant that more inventories were being converted into sales however the value drops in the last 2
years and comes close to the industry average which means that PSL is not doing any better than
other firms in its inventory management.
In the rest of the ratios PSL is not drastically different from other firms in the industry as its
average value revolves around the industry average showing that it is doing well. Sales however
do tend to be more than the assets as compared to other firms.

Analysis of Profit Margin Ratios

Pakistan Synthetic Limited

Analysis of profit margin ratios
2013
2012
2011 2010 2009 Ind avg
Gross Profit Margin
6.07%
5.06% 14.12% 4.49% 5.78% 241.12%
Operating Profit Margin
3.58%
3.01% 10.83% 2.55% 3.35% 10.08%
Net Profit Margin
0.86%
0.42% 6.89% 1.58% 1.73% 13.32%

The gross profit margin shows ups and downs throughout the 5 years that we have analyzed. Its
highest point was 14.12% in 2011 due to the high sales and profit during this year. The values
are however hard to compare to the industry average because of the abnormally high average
value of 241% showing that other firms have a much higher gross profit margin. This could be
due to the sample of firms that we have taken for our analysis.
Operating profit margin remains below industry average for all years except in 2011 when the
profit was highest. Net profit margin also shows a drastic drop after 2011 and all values are much
below industry average showing that PSLs profit margins are much lower compared to other
firms in the industry.

Analysis of Depreciation

Pakistan Synthetic Limited

Analysis of Depreciation
2013
2012
2011
2010
2009
Accumulated depreciation as a percent of gross plant assets
67.99% 63.25% 70.24% 85.57% 81.88%
Annual depreciation expense as a percent of gross plant
4.89% 4.66% 4.87% 5.33% 5.19%
Annual depreciation expense as a percent of sales
3.09% 3.42% 3.11% 3.30% 4.22%

All three ratios of depreciation generally show a downward trend showing that both accumulated
and annual depreciation has significantly gone down since 2009. As a percentage of gross plant
the accumulated depreciation was 81.8% in 2009, increased a little the next year but since then
has constantly fell. Annual depreciation shows the exact same trend. Annual depreciation as a
percentage of sales was 4.22% in 2009 and this also falls till it reaches 3.09% in 2013.

Analysis of Discretionary Expenditures

Pakistan Synthetic Limited
Analysis of Discretionary Expenditures
2013
2012
2011
2010
2009
Net sales
5123546 4397083 4154303 3280755 2452646
Plan assets (net)
1,035,139 1,186,323 1,154,708 293,070 360,693
Maintenance and repairs
13356
16551
8109
10135
8383
Advertising
0
0
0
0
0
R&D
0
0
0
0
0
Maintenance and repairs/Sales
0.26%
0.38%
0.20%
0.31%
0.34%
Maintenance and repairs/Plant
0.012903 0.013952 0.007023 0.034582 0.023241
Advertising/Sales
0
0
0
0
0
R&D/Sales
0
0
0
0
0

Only the analysis of maintenance and repairs can be done for PSL as it does not have R&D and
advertising expenses. Maintenance and repairs increase in 2010, fall again in 2011, after which it
goes to its highest of 16,551 in 2012 and then falls to 13,356. Maintenance and repairs to sales
ratio follows the same trend being the highest in 2012. As a ratio of Plant assets however it rises
in the first two years and then starts to fall reaching a value of 0.012 or 1.2% in 2013.

Market Measures

Price to earnings
Price to book
Earnings yield
Dividend Yield
Dividend payout ratio

Pakistan Synthetic Limited

Market Measures
2013
2012
23.6819
57.3634
0.9304
0.9912
0.0422
0.0174
0.0000
0.1047
0.0002
6.0082

2011
2.6385
0.6474
0.3790
0.0001
0.0002

2010
9.4083
0.5537
0.1063
0.1429
1.3441

2009 Ind Avg

7.5129 0.818396
0.3539 6.962469
0.1331 -1.42194
0.0000 0.030557
0.0000 0.405149

Price to earnings ratio shows a highly fluctuating trend with its values being highest in 2012 and
2013 due to high share prices and a fall in EPS. 2011 has the greatest EPS and hence the lowest
price to earnings ratio.
Book value rises from 2009 to 2013 but not by as much as the price of the shares hence the price
to book ratio rises throughout however it is still well below the industry average of 6.96.
Dividend payout is close to zero for 2009, 2011 and 2013 but in the remaining two years it is
over the industry average due to high dividends being paid during these years. The dividend
yield shows a similar pattern to the dividend payout ratio. Earnings yield increases for the first
three years after which it falls but remains positive and above industry average throughout the
five years

Conclusion
Bankers perspective:
Before giving out the loans the bankers would check the credit history of a company and its
ability to meet its short term and long term obligations. CC12 shows the liquidity of the
company. The current ratio is above the industry average because of the increase in the current
assets over the current liabilities. The acid test ratio is higher than the industry average. This
implies that the company has enough assets to pay off its liabilities and is not at any risk.
Company also has higher cash flow generated from operations to cover its finance cost however
it is still below the industry average.
So as a banker I would give loan to this company on the basis of its increase in short term
liquidity.

Investors perspective:
In order to decide whether to invest in a company, the ideal ratios to analyze are the Market
measures. The first ratio is the Price to earnings ratio which shows an increasing trend. This
shows that the company has enough earnings to attract shareholders or the price of the share is
high. High dividends were paid in 2010 and 2012 even though these were not periods of high net
income and dividend yield and payout ratio is high for these two years. In the other years,
especially in 2011 when the net income was highest, dividends were not paid. This however,
should not be taken as a bad sign for investors. The earnings that were retained during the years
that dividends were not paid contributed to growth and in turn led to higher share prices in the
last two years which the investors can look to benefit from in the form of capital gain.