LIQUIDITY RATIO: 1-Current Ratio The current ratio is the ratio of total current assets total current liabilities.

The current ratio of a firm measures its short-term solvency, i.e. its ability to meet short-term obligations. As a measure of short term/current financial liquidity, it indicates the rupees of current assets available for each rupee of current liability / obligation. The higher the current ratio, the large the amount of rupees available per rupee of current liability, the more the firms ability to meet current obligations and the greater the safety of funds of short term creditors. Thus, current ratio, in way, is a measure of margin of safety to the creditors. The Current Ratio can be obtained by the following formula. Current Ratio = The current ratio of the NCL for the five years is given below. Year 2004 1.12 Current ratio 2003 1.00 2002 1.23 2001 .72 2000 .93

COMMENTS ON CURRENT RATIO OF NCL From the above table we can see that the current ratio of the Nishat (Chunian) limited is increasing every year but it is less than standard that is 2:1. In the years 2000,2001,2003 the company current liabilities are more than current assets but from the year 2004 they try to reduce there current liabilities and take liabilities in the form of long term debt. So in year 2004 the company current ratio has been increased from 1 but it is not according to the international standard that is 2:1so the NCL try to increase there current ratio. 2-Net working capital: The net working capital ratio can be obtained by deducting the firm current liabilities from the current assets. Net working capital ratio = current Assets current liabilities The net working capital ratio for the five years for NCL is given below.

YEAR 2004 2003 2002 2001 2000

RATIO 166020 -2925 181307 -317903 -40622

COMMENTS ON NET WORKING CAPITAL RATIO If we can see the above table the net working capital ratio of the years 2000, 2001,2003 is negative because the current liabilities are more than current assets. The ratio is not satisfactory in these years but in the year 2004 the company change it policy and reduce their current liabilities and increase their current assets. So in the year 2002 the ratio become the positive and the performance of the company is good. The NCL should try to reduce their current liabilities.

3-Liquid / Acid Test / Quick Ratio The acid - test ratio is the ratio between quick current assets and current liabilities. The term quick assets refers to current assets which can be converted into cash immediately or at a short notice without dimension of value and will include cash balances, bills receivable, sundry debtors and short-term investments. Thus, the current assets that are e The quick Ratio can be obtained by the following formula. Acid Test Ratio =

The quick ratio of the NCL for the five years is given below. RATIO Quick ratio 2004 2003 2002 2001 2000

.61

.51

.60

.32

.58

COMMENTS ON QUCIK RATIO OF NCL

The quick ratio of the NCL is improved in the year 2004 up to some extent but it is less according to the international standard that is 1:1. It means that the company invests more money in inventory and prepaid expenses and the company current liabilities are more than current assets but from the year 2004 they try to reduce there current liabilities and take liabilities in the

form of long term debt. So in year 2004 the company quick ratio has been improved up to some extent. The NCL should try to reduce their investment in inventory and prepaid expenses so as to improve their quick ratio and also take steps to reduce their current liabilities.

LEVERAGE RATIO
a) Debt ratio Debit ratio is calculated to check the total asset financed by the firm creditors. Debt ratio is calculated by dividing the firm total liabilities over firm total assets. Debt ratio = Total liabilities / Total assets x 100 The debt ratio of the NCL for the five years is given below.

RATIO Debt ratio

2004 56.71%

2003 55.50%

2002 58.85%

2001 68.35%

2000 66.58%

COMMENTS ON DEBT RATIO: The debt ratio shows that who much are the liabilities in against of the total assets of the company. In the years 2000-2001 there is an increasing trend in the debt ratio of the NCL because in these years the company obtain the long-term loan to install the weaving unit plant and also issue debentures in the market. In the year 2000 the company earn huge profit and pay of it some liabilities so this ratio is little bit improve in year 2004. In 2003 the company debt ratio is decreased if we compare it with 2001.The ncl trying to reduce their debt equity ratio the result of which we can see in the year 2002.

a) Debt equity ratio

The debt equity ratio indicates the relationship between the long-term funds provided by creditors and those provided by the firms owners. The standard debt equity ratio is 60:40. The lower the debt equity ratio that is preferable. Debt equity ratio can be obtained by the following formula. Debt equity ratio = long term debt/ total capitalization * 100 The debt equity ratio of the NCL for the five years is given below.

RATIO Debt equity ratio

2004 37:63

2003 30:70

2002 43:57

2001 39:61

2000 49:51

COMMENTS ON DEBT EQUITY RATIO: Debt equity ratio shows that what is the proportionate of liabilities in against of the equity. The low the debt equity ratio more creditors are prefers to give loan. According to international slandered this ratio could be 60: 40. If we can see the debt equity ratio of the NCL it is less than 60:40 in all the 5 years so the performance of the company is excellent. Because the debt equity ratio is less than 60:40 so the company change their policy of taking loan. And in order to improve their current ratio they try to obtain loan in the form of long-term loan. Activity ratio a) Inventory turnover and average age of inventory. This ratio establishes relationship between cost of sold during a given period and the average amount of inventory held during that period. This ratio reveals the number of times finished stock is turned over during a given accounting period. In general, a high inventory turnover ratio is better than a low ratio. A high ratio implies good inventory management. The inventory turnover and average age of inventory is obtained by the following formula. Inventory Turnover Ratio = cost of goods sold / Inventory Average Age Of Inventory =360 / Inventory Turnover Ratio

The inventory turnover ratio and Average Age Of Inventory of the NCL for the five years is given below. RATIO Inventory turnover ratio 2004 8.05 Times 45 days 2003 6.54 Times 55days 2002 6.30 Times 57days 2001 5.35 Times 67days 2000 7.97 Times 45days

Average Age Of Inventory

COMMENTS ON TIME INVENTORY TURNOVER RATIO: If the inventory turnover ratio of the company is increasing and average age of inventory is decreasing this is a good sign for the company. In the year 2003 And 2004 the company average age of inventory and inventory turnover ratio is excellent. In the year 20023 and 2004 the inventory turnover ratio is increased and average age of inventory is decreased. The NCL should try to decrease there average age of inventory ratio and increase there inventory turnover ratio in order to increase sales and earn more profit b) Account receivable turnover and average collection period. This ratio measures the accounts receivables (trade debtors and bills receivables) in terms of number of days of credit sales during a particular period. In short we can say that it shows how quickly receivables or debtors are converted into cash. These ratios can be obtained by the following formulas. Account receivable turnover ratio = credit sales / accounts receive able Average collection period = 360 / Account receivable turnover ratio The accounts receivable turnover ratio and Average collection period of the NCL for the five years is given below.

RATIO Accounts receivable turnover ratio

2004 14.69 Times 24 days

2003 14.52 Times 25days

2002 15.54 Times 23days

2001 18.59 Times 19days

2000 19.90 Times 18days

Average collection period

COMMENTS ON ACCOUNT RECEIVABLE TURNOVER AND AVERAGE COLLECTION PERIOD RATIO: If the account receivable turnover ratio is increasing and the average collection period is decreasing this is excellent for the company. The same in case with the NCL there is a decreasing trend in the average collection period ratio and increasing trend in the account receivable inventory turnover ratio .The above table shows that. It means that the company is efficient for collecting their account receivable because if we take 30 days as credit term as standard it means the company is efficient in collection of the debts. The NCL average collection period is also less than average payment period. It means that the company performance is excellent because it pay for it purchases after many days.

C) Fixed asset turn over ratio This ratio is based on the relationship between the sales and fixed assets of a firm. The higher the turnover ratio, the more efficient the management and utilization of the fixed assets while low turnover ratios are indicative of under utilization of available resources and presence of idle capacity. This ratio can be obtained by the following formula. Fixed Assets Turnover Ratio = The fixed asset turnover ratio of the NCL for the five years is given below. RATIO Fixed asset turnover ratio 2004 2.30 2003 2.16 2002 2.22 2001 2.00 2000 1.97

COMMENTS ON FIXED ASSETS TURNOVER RATIO There is an increasing trend in the fixed asset turnover ratio of the Nishat (Chunian) limited. The ratio is increased in the year 2001,2002,2003 and 2004 It means that the management is efficient in the utilization of the fixed asset for generating their sales.

d)

Total Assets Turnover Ratio This ratio is based on the relationship between the sales and assets of a firm. The higher

the turnover ratio, the more efficient the management and utilization of the assets while low

turnover ratios are indicative of under utilization of available resources and presence of idle capacity. Total Assets Turnover Ratio = The total asset turn over ratio of the NCL for the five years is given below. RATIO Total asset turnover ratio 2004 1.50 2003 1.38 2002 1.40 2001 1.31 2000 1.33

COMMENTS ON TOTAL ASSET TURNOVER RATIO: There is an increasing trend in the total asset turnover ratio of the Nishat (Chunian) limited. The ratio is increased in the year 2000,2002 and 2004. It means that the management is efficient in the utilization of the total asset against the sales. PROFITABILITY RATIO Gross Profit Ratio The gross profit margin indicates the percentage of each sales dollar remaining after the firm has paid for its goods. Higher the ratio, the better it is, and the lower the relative cost of merchandise sold. A low ratio indicates unfavorable trends in the form of reduction in selling prices or increase in cost of production. Gross Profit Ratio = x 100 The Gross Profit Ratio of the NCL for the five years is given below. RATIO Gross Profit Ratio 2004 14.09% 2003 17.6% 2002 18.09% 2001 22.3% 2000 26.6%

COMMENTS ON GROSS PROFIT RATIO:

There is an increasing trend in the gross profit ratio of the NCL. It means that the management of the NCL is working in efficient way. The management manage the inventory in a better way, reduces the cost of goods purchased to increase their gross profits. In the year 2004 the profit is decreased from the last year 2001 but the year 2000 is not taken as a representative year because in that year the NCL earn huge profit due to the stock of cotton.

b)

Operating Profit Ratio The operating profit margin represents what are often called the pure profits earned on

each sales rupee. Operating Profit Ratio =Operating profit/ |Net sales x 100 The operating Profit Ratio of the NCL for the five years is given below. RATIO Operating Profit Ratio 2004 12.13% 2003 11.66% 2002 18.52% 2001 16.09% 2000 22.38%

COMMENTS ON OPERATING PROFIT RATIO: There is an increasing trend in the operating profit ratio of the NCL. It means that the management of the NCL is working in efficient way that they control their selling and distribution expenses to increase their operating profits. In the year 2002 the profit is decreased from the last year 2000. C)Net Profit Ratio This ratio is also known as net margin. This measures the relationship between net profits and sales of a firm. This ratio is calculated after deducting non-operating expenses, such as loss on sale of fixed assets etc., from operating profit and adding non-operating income like interest or dividends on investment, profit on sale of investments or fixed assets, etc., to such profit. Net Profit Ratio = x 100 The Net Profit Ratio of the NCL for the five years is given below. RATIO Net Profit Ratio 2004 9.7% 2003 7.7% 2002 12.4% 2001 8.1% 2000 15.1%

COMMENTS ON NET PROFIT RATIO: There is an increasing trend in the net profit ratio. In the year 2000 the company earn huge profit due to the stock of cotton but In the years 2001 the company net profit ratio is low. In 2001 the NCL installed the weaving unit and, and the net profit ratio is improved. The company also installed new spinning unit in the year 2002 and increase the loom capacity of the weaving plant thats why the company net profit ratio is good in the year 2003 and 2004. d)Return on total assets This ratio measures the overall effectiveness of management in generating profits with its available assets. The higher the firms return on total assets so better. This ratio can be obtained by the following formula. Return on total assets=Net profit/ Total assets * 100 The return on investment Ratio of the NCL for the five years is given below. 2004 14.57% 2003 10.69% 2002 18.06% 2001 10.59% 2000 20.05%

RATIO Return on total assets Ratio

COMMENTS ON RETURN ON TOTAL ASSETS RATIO: There is an increasing trend in the return on investment ratio. In the years 2000 the company return on investment ratio is high. In 2001,2003 the NCL installed the weaving unit and in the year 2000 the company earn huge profit due to the stock of cotton, and the return on investment ratio is improved. The company also installed new spinning unit in the year 2000 and increase their loom capacity for the weaving plant thats why the company return on investment ratio is good in the year 2003 and 2004. e) Return on Equity The return on equity (ROE) measures the return earned on the owners investment. This ratio is a measure of the percentage of net profit to shareholders funds. Return on Equity = x 100 The return on equity Ratio of the NCL for the five years is given below.

RATIO Return on equity Ratio

2004 33.66%

2003 24.02%

2002 43.91%

2001 33.47%

2000 60.03%

COMMENTS ON RETURN ON INVESTMENT RATIO: There is an increasing trend in the return on equity ratio.In the year 2000 the company earn huge profit due to the stock of cotton, and the return on equity ratio is excellent in that year. The company also installed new spinning unit in the year 2000 and increase thier loom capacity of the weaving plant thats why the company return on equity ratio is good in the year 2003 and 2004. MARKETRATIO A) Price Earning (P/E) Ratio: The price earning ratio represents the amount investors are willing to pay for each rupee of the firms earnings. The level of the P/E Ratio indicates the degree of confidence (or certainty) that investors have in the firm/s future performance This ratio helps the shareholders to decide whether shares should be purchased or not in a company. The lesser the P/E Ratio, the greater investor confidence in the firms future. Price Earning Ratio = The Price Earning ratio of the NCL for the five years is given below. RATIO Price Earning ratio 2004 4.36 2003 5.42 2002 2.57 2001 2.59 2000 3.09

COMMENTS ON PRICE EARNING RATIO: The lesser this ratio the more beneficial for the shareholders and more shareholder are interested in the purchasing the shares. The NCL try to decrease their price earning ratio this can be seen from the Price Earning Ratio of year 2002.

b) Dividend Payout ratio This ratio indicates as to what proportion of earning per share has been used for paying dividend. Dividend payout Ratio = x 100

The Dividend payout Ratio of the NCL for the five years is given below. RATIO Dividend payout Ratio 2004 08% 2003 33% 2002 20% 2001 40% 2000 28%

COMMENTS ON DIVIDEND PAYOUT RATIO: If we can see the result of dividend payout ratio in the year 2001,2003 the NCL pay nearly 40% dividend from its total earning. In the year 2002 and 2000 and 2004 the NCL pay 28 and 22% and 8% dividend from its earning. The NCL pay less dividend in the year 2004 and 2002 because the company want to make expansion in their business thats why the company pay less dividend then other years. The result of the dividend payment ratio is good. The shareholder has more confidence on the company.

c) Dividend Yield Ratio This ratio is important for those investors who are interested in the dividend income. The formula to calculate the dividend yields ratio is given below Dividend Yield Ratio = x 100 The dividend yield ratio of the NCL for the five years is given below. RATIO Dividend Yield Ratio 2004 02.00 2003 06.25 2002 07.78 2001 15.62 2000 09.10

COMMENTS ON DIVEDEND YIELD RATIO OF NCL The NCL dividend yield ratio is good in the year 2001. In the year 2001 the company pays more dividend on it share that is 41%and the earning per share is also good. The reason of improved performance that because the NCL weaving unit stated it production in year 2001. In the year 2000 the company change their policy and wants to make expansion in their business. Thats why the ratio is less in the remaining years.

e )Earning yield ratio Earning yield ratio can be obtained by the following formula. Earning yield ratio =Earning per share/ market price per share x 100 The Earning yield ratio of the NCL for the five years is given below. RATIO 2004 22.91% Earning Yield Ratio COMMENTS ON EARNING YIELD RATIO. 2003 18.45% 2002 38.82% 2001 38.56% 2000 32.31%

Higher this ratio it will be beneficial for the company. If we see there is a increasing trend in the earning yield ratio of the NCL. It means that the NCL share is earning more rather than it price in the market. So the result of the earning yield ratio of the NCL is good.