Common Size Analysis

Comments on Horizontal Analysis

In Income statement, 2006 is taken as base year we see that the ratio is gradually
increasing throughout the year 2011, there is decrease in sales in 2012 to 2014 due
to the price factor decrease and decrease in production of paper, cartons held due to
the plant is effected by the fire and most of the plants stop working in that duration.
The worst position is in the year of 2010 to 2011, Gross Profit is decrease by 38%
and 71% respectively from the base year 2006 due to the basic reason of fire held
in plant production part.
Although the company make sales from the inventory which is placed in
warehouses, and maintain its place in the market as Monopolist in paper making
industry. In present 2015, the company overcome all its losses and come back to its
position again.
The provision of taxation head is added when the company is in loss. The packages
ltd fails to perform well in the 2010 and operations almost end in this year.
Therefore in 2010 the provision for Taxation is decrease by 6% from the base year.
Because company not pay the tax in that year.
The overall performance of the company is good from 2006 to 2009, and from
2010 to 2012 the position of the company is not good as it is in loss condition
because of the fire destroyed the mostly plants of the company, and again make its
profit in 2013. Now the current profit in 2015 is 54.01%.
In balance sheet, the horizontal analysis is held separately for assets, liabilities and
equity portion. In this analysis we see the liquidity of the assets from the total

assets and utilization of the assets in company operations and show the current
performance of the company from that last year or base year.

Comments on Vertical Analysis

In vertical analysis the sales of every year is considered as 100% and all other heads is compared
with the sales. This analysis show that how a company can make profit from sales by covering
the cost of goods(cost in making the product) and minimize the operating expenses.

The analysis is done from the operating expenses (including labor cost, machinery cost) From
the ratios the 2009 is the strong year for company because in this year the CGS is 97.81%,
Gross profit is 2.18% and operating expense is 0.84%, this means that company done the
operations very well by controlling the operating expense and make the profit of 28.93%.
The 2012 is the worst year for the company because the company is in loss for about -20.78%
Although the profit is made of 12.55% and operating expenses is also 0.26% but the overall
company gain no profit in this year because the provision for taxation is increased in this year is
7.57% the company pay the heavy tax in this year.
The reason behind it is that in last years 2010 and 2011 the unpleasant event of fire in the plant
cause the production stopped and therefore the provision for taxation was very low in that year.
And after the recovery the company have to pay the taxes in 2012 year. Therefore the company is
in loss in this year.

Ratio Analysis
Liquidity Ratio
Liquidity ratio explain the company current ability to meet the liability. And company assets to
liquidate easily.
In Liquidity Ratios the Gross Working capital ( current assets) show the gradually increase
because the company have all type of stock in all type of environment even in the recession
period of Pakistan Economy.
Means company have enough stock that it can easily carry on its operation by using this stock or
assets.
Net Working Capital showing the significant growth trend during the ten year symbolizing the
company strength to meet its liability with ease tune.
Current Ratio showing the capacity of company currents assets to meet her current liabilities
with significant healthy trend having ratio more than 01.00 in whole ten year trend analysis.
Quick ratio depicting the company has not enough liquid assets besides others financial strenght
to meet its urgent current liabilities. Ten year trend analysis shows the mix trend about the
concerned ratio.
Because Quick ratio include the cash, account receivables and short term investment all thses
thing can be easily convert to cash to meet its urgent currnt liabilities. But company has not the
enough Current assets beside other financial strength. From quick ratio point of view company
fails to meet its Quick ratio requirements.

Activity Ratio
Activity ratio defines the firm's ability to convert different accounts within its balance sheets
into cash or sales. Activity ratios measure the relative efficiency of a firm based on its use of its
assets, leverage or other such balance sheet items and are important in determining whether a
company's management is doing a good enough job of generating revenues and cash from its
resources.

Inventory turnover ratio defines how efficiently the inventory is utilized and generate revenue
from it. Inventory turnover ratios depicting the healthy generation of revenue as sales from
inventory during the ten year trend. In 2015, significant growth in ratio showing the remarkable
position of sales.
Average age of inventory
The company showing significant efficiency to sell her inventory during tenor. In 2015, time has
been reduced to 65 days to sell her inventory
Account Receivable Turnover ratio
This shows the company ability to utilize its assets in cash flow activities like operating,
investing and financing. Account Receivable Turnover ratio showing significant maintenance for
receiving account receivables during the time period.
If sales increase the account receivable turnover also increase. Average Collection period also
link with the A/R turnover ratio. Average collection period shows the collection of receivables in
days. In 2010, the collection period is decreased to 38days, company needs the cash from
receivables because unusual event of fire is occurred in this year and company need the cash for
operating its activities
Account Payable turnover Ratio is from liability side, defines the company ratio to pay off the
liability. Ratio increase means the company payoff its liabilities. But this ratio should be healthy
if the ratio is balanced means company utilized its payable in cash flow activities and generate
more revenue from it.
Company is sustaining its current liabilities to generate its cash flows more so ratio is declining
over the tenor while credit market rely on company repute to establish sustainable corporate
credit relationship.
Average Payment Period also showing the analysis for account payable turnover ratio.

Operation Cycle and Cash conversion Cycle Its the combination of Inventory turnover ratio,
Account receivable turnover ratio and account payable turnover ratio shows how efficiently
company convert its assets and other resources into cash. Company operating cycle showing its
excellent performance for the conversion of its assets and other resources into cash flow in less
time called 42 days in 2015.

Leverage Ratio
This ratio show the company capacity of the assets to repay the debt