GROUP DETAIS

FINANCIAL
ANALYSIS
ABDULLAH AKHTAR
ASAD AKHTAR

0064
0063

SULIMAN TAHIR

0065

ARSLAN YOUNUS

0104

SUBMIT TO
MISS SEHAR IQBAL
DATE
JULY 11 2015

FINANCIAL ANALYSIS
NATIONAL FOODS VS SHEZAN FOODS

LIQUIDITY RATIOS:

Current Ratio:-

Formula: C. Assets/C. Liabilities

NATIONAL FOODS
2012
1.33

2013

2014

1.30

1.4

SHEZAN FOODS
2012
1.7

2013

2014

1.64

1.64

ANALYSIS:

This ratio shows how much current assets company has against each dollar of current

liability.
In above situation both companies current ratio is more than 1 which means both

companies have sufficient amount of current assets over current liabilities.

Shezan Foods is showing better results of current ratio than National foods.

Quick Ratio:-

Formula: C. Assets-Inventory-Pre payments/C. Liabilities

NATIONAL FOODS
2012
.38

2013

2014

.50

.55

SHEZAN FOODS
2012
.46

2013

2014

.50

.56

FINANCIAL ANALYSIS

ANALYSIS:

This ratio shows how much current assets company actually possesses against its current

liabilities after deducting inventories and payables.

In above situation both companies quick ratio is below standard because they have

invested more in inventory and created payables.

There is very little difference in the results of both companies quick ratio.
Both companies should work on their inventory control management and should apply
JIT approach.

OVERALL ANALYSIS OF THIS HEAD:The overall results of liquidity ratios are showing that Shezan Foods has a little edge over
National Foods. But both companies need to work on inventory control management.

PROFITABILITY RATIOS:

Gross Profit Margins:-

Formula:Gross Profit/Sales:
NATIONAL FOODS
2012
32.4%

2013

2014

34.5%

35%

SHEZAN FOODS
2012
26.8%

2013

2014

30%

30%

ANALYSIS:

This ratio shows how much profit company is earning on each dollar of sales.
GPM of National Foods is increasing rapidly in first to second year and a slight change in

last year while Shezan Foods GPM is also increasing rapidly in first to second year.
Both companies GPM is showing progress because their CGS is satisfactory.
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FINANCIAL ANALYSIS

Both companies can improve their GPM by increasing sales, introducing new product or
entering in a new market.

Net Profit Margins:-

Formula:Net Profit/Sales:
NATIONAL FOODS
2012
8.1%

2013

2014

7.9%

7.5%

SHEZAN FOODS
2012
4%

2013

2014

4.4%

3.8%

ANALYSIS:

This ratio shows how much profit company is earning on each dollar sales because NP is

calculated after deducting all expenses from GP.

In above situation National Foods NPM is diminishing because its operating expenses are
more. (i.e. Selling exp, Marketing exp, Depreciation, Salaries e.t.c)
While Shezan Foods NPM is increasing in second year because its operating expenses are

appropriate but decrease in last year because operating expenses are increased.
Both companies can improve their NPM by Entering in to new market, by increasing
sales, by improving quality of product, by introducing new product line and more
importantly by keeping their operating expenses as low as possible.

Return On Equity:-

Formula:Net Profit/Equity:
NATIONAL FOODS
2012
41.5%

2013

2014

40.5%

32.8%

SHEZAN FOODS
2012
18.56%

2013

2014

19%

17.27%

FINANCIAL ANALYSIS

ANALYSIS:

This ratio shows how much return company is generating for its shareholder on each

dollar of their investment.

For National Foods ROE is relatively showing decreasing trend throughout the years.
From 2013-14 the change in ratio is high that means company has not invested the

amount of shareholders in profitable projects.

For Shezan Foods ROE is slightly increasing from 2012-13 but in last year it diminishing

more rapidly that indicates company is not using its shareholders investment.
Although National Foods ROE is more than Shezan Foods. Shezan Foods can improve its
ROE by investing in safe and sound projects.

Return On Assets:-

Formula: Net Profit/ T. Assets:

NATIONAL FOODS
2012
18.44%

2013

2014

16%

14.76%

SHEZAN FOODS
2012
9.43%

2013

2014

10.93%

9.67%

ANALYSIS:

This ratio shows how much return company is generating form each dollar of assets

employed.
For National Foods ROA is showing decreasing trend It means company is not using its

assets efficiently OR another reason may be that it has sold its assets by the time.
For Shezan Foods ROA is increasing in second year that Shows Company is using its
assets efficiently. From 2013-14 ROA is decreasing because company might have sold its
assets.
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FINANCIAL ANALYSIS

In comparative analysis National Foods ROA is better than Shezan Foods because it has
invested more in assets and also working effectively.

OVERALL ANALYSIS OF THIS HEAD:In above analysis of profitability ratio we find out that National Foods is showing more results
than Shezan Foods. Shezan Foods needs to create more innovations by the time for progress and
should also keep its expenses low.

EFFICIENCY RATIOS:

Inventory Turnover Ratio:-

Formula: C.G.S/Inventory:
NATIONAL FOODS
2012
3.1 times

2013

2014

2.9 times

2.8 times

SHEZAN FOODS
2012
2.93 times

2013

2014

3.85 times

3.96 times

ANALYSIS:

This ratio shows how many times company replaces its old inventory with new inventory.
For National Foods the ratio is decreasing slightly it means company sales are low and its

CGS is more.
For Shezan Foods the ratio is increasing by the time which is good for the company as its

sales are sufficient.

In above analysis Shezan Foods inventory turnover ratio is showing progress.
National Foods can improve its inventory turnover by reducing its CGS, Availing
discounts or switching to new suppliers.

FINANCIAL ANALYSIS

Receivable Turnover:-

Formula:Sales/Receivables:
NATIONAL FOODS
2012
15.2 times

2013

2014

7.75 times

7.30 times

SHEZAN FOODS
2012
14.9 times

2013

2014

19 times

14.5 times

ANALYSIS:

This ratio shows how many times company generates receivables form its sales.
For National Foods receivables is decreasing rapidly by the time which means company

sales are low.

For Shezan Foods receivables turnover increase rapidly from 2012-13 after 2013-14 it
comes to the first years positionwhich means its sales are high in 2013 but in 2014 it

comes to the same level.

In comparative analysis Shezan Foods receivable turnover is higher than National Foods.
National Foods can improve its receivable turnover by increasing sales through
marketing, customer credit offers and availing discounts.

Avg Collection Period:-

Formula:Receivables/sales*365:
NATIONAL FOODS
2012
24 days

2013

2014

47 days

50 days

SHEZAN FOODS
2012
24 days

2013

2014

19 days

25 days

FINANCIAL ANALYSIS
ANALYSIS:

This ratio shows how much time receivables take to payback the cash.
For National Foods receivables days are increasing by the time which means company is

not recovering its amounts in time.

For Shezan Foods receivables days are decreasing in 2013 which means companys

recovery is good in that year but in 2014 receivables days are back to the normal time.
Shezan Foods Avg collection period is better than National Foods.
National Foods can improve its avg collection period by implementing its credit control
system more strictly and by revising credit terms.

OVERALL ANALYSIS OF THIS HEAD:In above analysis of efficiency ratio we find out that Shezan Food is showing progress as
compare to National Foods because Shezans sales are more and company is replacing its
old inventory with new inventory more efficiently and its collection period is also
satisfactory.

SOLVENCY RATIOS:

Debt To Assets Ratio:-

Formula: Debt/T.Assets
NATIONAL FOODS
2012
16%

2013

2014

22%

19%

SHEZAN FOODS
2012
14.16%

2013

2014

6.8%

6.1%

ANALYSIS:

This ratio shows how much of companys assets are financed by debt.
For National Foods ratio is increasing in 2013 which means company has acquired more
debt to finance more assets while in 2014 the companys debt is decreasing.
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FINANCIAL ANALYSIS

For Shezan Foods the ratio is decreasing rapidly by the time that shows company has not

purchased assets which are financed by debt.

By comparing both companies National Foods assets are more financed by debt.
Both companies should manage their amount of debt for progress.

Debt To Equity:

Formula: Debt/Equity
NATIONAL FOODS
2012
36%

2013

2014

57%

43%

SHEZAN FOODS
2012
27.89%

2013

2014

11.82%

10.96%

ANALYSIS:

This ratio shows how much debt company has against each dollar of its shareholder

investment.
For National Foods ratio is increasing in 2013 which means company s acquiring more

debt against shareholders equity and in 2014 ratio is decreasing.

For Shezan Foods the ratio is rapidly decreasing by the time which means company is

eliminating the amount of debt against shareholders equity.

Both company should manage their debt and equity ratio for better results.

Debt to Capitalization:-

Formula: Debt/ (Debt + Equity)

NATIONAL FOODS
2012
26.60%

2013

2014

36.21%

29.89%

FINANCIAL ANALYSIS

SHEZAN FOODS
2012
21.80%

2013

2014

10.57%

9.88%

ANALYSIS:

This ratio shows the capital structure of the company. It tells the amount of debt company

has in its total capital. Debt should be less than equity to have good capital structure.
For National Foods ratio is increasing in 2013 which means company has acquired more

debt to finance its fixed assets (i.e. machinery, land & building etc.).
For Shezan Foods ratio is decreasing which means company has shortened the amount of

debt by the time.

Shezan Foods has better capital structure because its debt is less than its equity.

OVERALL ANALYSIS OF THIS HEAD:In above analysis of solvency ratios we find out that Shezan Food is showing progress as
compare to National Foods because Shezans capital structure is consist of less debt and
more equity.

MARKET RATIOS:

Earning per Share:-

Formula: Net Profit/ No of Shares

NATIONAL FOODS
2012
$5.6

SHEZAN FOODS
9

2013

2014

$6.53

$7.06

2013

2014

FINANCIAL ANALYSIS
2012
$3.45

$3.77

$3.56

ANALYSIS:

This ratio shows how much earning company generates on its each share. Healthy

companies show growth in EPS over the period.

For National Foods EPS is increasing by the time which is good for the company and it

will encourage the shareholder to invest in the company.

For Shezan Foods EPS is decreasing by the time which is not good for the company and

it would not get the interest of the investors.

In above situation National Foods is showing progress as its EPS is higher than Shezan

Foods.
Shezan Foods can improve its EPS by increasing its net profit.

Divided per Share:-

Formula: Dividend/ No of Shares

NATIONAL FOODS
2012
$.99

2013

2014

$3.75

$1.60

SHEZAN FOODS
2012
$.75

2013

2014

$.81

$.90

ANALYSIS:

This ratio shows the amount of dividend that company pays on each share.
For National Foods DPS is rapidly increasing in 2013 because of its earning in that year

while in 2014 DPS is decreasing.

For Shezan Foods DPS is improving with the passage of time.
Comparatively National Foods DPS is better than Shezan Foods because its earnings are

also greater than Shezan Foods. It will encourage investors to invest in National Foods.
Shezan Foods can improve its DPS by increasing its net profit.

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FINANCIAL ANALYSIS

Dividend Payout Ratio:-

Formula: Dividend per Share/ Earning per Share

NATIONAL FOODS
2012
17.67%

2013

2014

57.42%

22.66%

SHEZAN FOODS
2012
21.73%

2013

2014

21.48%

25.28%

ANALYSIS:

This ratio shows the percentage of dividend paid from earning.

For National Foods percentage of dividend is increasing rapidly in 2013 which means

company increased its net earnings in that year by keeping its operating expenses low.
For Shezan Foods percentage of dividend is decreasing slightly in 2013 but improved in

2014.
National Foods encourage more investor to incest in the company by considering the
companys payout ratio.

OVERALL ANALYSIS OF THIS HEAD:In above analysis of market ratios we find out that National Foods is better than Shezan
Foods because its EPS, DPS and payout ratio is much better. It will encourage investors
to invest their money in National Foods.

CONCLUSION:By Comparative analysis of National Foods & Shezan Foods we found the following:

Shezan Foods has slightly better results of liquidity ratio then the National Foods , rather

both work on inventory control management and apply JIT approach.

According to profitability ratio National Foods is showing progress as it sales are
sufficient with low cost of production, they are keeping their operating expenses (Dep,

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FINANCIAL ANALYSIS
marketing & selling) as low as possible, investing the shareholder amount in sound

projects and finally using their assets well to create innovation with the time.
Shezan Foods presenting more efficient results. Its inventory control management,

receivable turnover & Average collection period is better than National Foods.
According to solvency ratio analysis Shezan Foods is Showing progress as its assets are
more financed by equity then debt, debt to equity ratio is better than National Foods and

overall capital structure is mostly consist of equity.

In market ratio analysis we found that National Foods is better than Shezan Foods
because its earning more on each share with respect to Shezan Foods and also paying
more dividends to its shareholders.

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