ACKNOWLEDGEMENT

Thanks to Allah Almighty, the most gracious, the merciful, worthy of all praises, the Lords of Lords, the Lord of worlds originator of earth and heaven and creator of all the universe Who is the supreme authority, knowing the ultimate realities, underlying all sorts of phenomenon going in this universe. Who guides the way and gives the courage to complete the tasks. I am heartily thankful to my teacher, MR BURHAN Ali SHAH, whose encouragement, guidance and support from the initial to the final level enabled me to develop an understanding of the subject. Lastly, I offer my regards and blessings to all of those who supported me in any respect during the completion of the project.

Chapter no 1:
Abstract:
This project is based on the subject analysis of financial statements. Main objective of this project is to learn how financial statements are analyzed. For which initially I selected a company and then searched about its history, nature of its business and got its annual reports which contain different informations like narrative reports, financial statements and notes to financial statements. That enabled be to do the detailed analysis of financial statement by using two different methods of analysis: i) ii) Ratio analysis Vertical and horizontal analysis

Then I discussed the findings and recommendations.

Purpose of financial reporting:

"The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions." Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position. Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently."Financial statements may be used by users for different purposes: Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management's annual report to the stockholders. Employees also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labor unions or for individuals in discussing their compensation, promotion and rankings. Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are often used by investors and are prepared by professionals (financial analysts), thus providing them with the basis for making investment decisions. Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditures.

Government entities (tax authorities) need financial statements to ascertain the propriety and accuracy of taxes and other duties declared and paid by a company. Vendors who extend credit to a business require financial statements to assess the creditworthiness of the business. Media and the general public are also interested in financial statements for a variety of reasons.

Standards and regulations: Different countries have developed their own accounting principles over time, making international comparisons of companies difficult. To ensure uniformity and comparability between financial statements prepared by different companies, a set of guidelines and rules are used. Commonly referred to as Generally Accepted Accounting Principles (GAAP), these set of guidelines provide the basis in the preparation of financial statements. Recently there has been a push towards standardizing accounting rules made by the International Accounting Standards Board ("IASB"). IASB develops International Financial Reporting Standards that have been adopted by Australia, Canada and the European Union (for publicly quoted companies only), are under consideration in South Africa and other countries. The United States Financial Accounting Standards Board has made a commitment to converge the U.S. GAAP and IFRS over time

Reason for the selection of bestway cement:

I have choose the bestway cement limited. In early 1992 when the Bestway Group decided to set up its first cement plant it faced multiple challenges mainly due to a lack of credibility as a business due to the absence of a track record in Pakistan. The domestic economy was highly inhospitable characterized by high interest rates, high inflation and low liquidity leading to a general economic and political inertia. Now Bestway is the second largest cement supplier in the country. So the main reason for choosing Bestway is to know that whether the decision of bestway group to start its operation on Pakistan was right and how is the financial position and performance of business now.

Introduction of company:
Bestway Cement Limited is part of the Bestway Group of the United Kingdom. Bestway Group was founded by Sir Mohammed Anwar Pervez nearly thirty three years ago on what could be best described as one mans vision and passion. Since then it has translated into a unique and successful group of businesses spread across the globe with the help of committed, professional and hardworking management and staff, together with loyal customers and suppliers. The Group has a well diversified portfolio incorporating within its folds cement manufacturing, global banking, wholesale cash & carry business, a string of retail outlets, real estate investment, ethnic food and beverage import and distribution and milling of rice. Recently the group has embarked

upon a large power generation project in Pakistan thus further diversifying its operations and revenue base. Bestway is U.Ks second largest cash and carry operator in terms of turnover with group annual turnover in excess of US Dollars 3.6 billion and profits in excess of US Dollars 135 million; the second largest cement producer in Pakistan and joint owner of Pakistans third largest bank, United Bank Limited. Its rice milling facilities are one of the largest of its kind in the country. The group is the largest overseas Pakistani investor with investments in excess of US Dollars 1 billion and a global workforce of over 22,000 people spread over four continents. In response to successive governments efforts to attract foreign investment in the country Bestway Group has invested heavily in Pakistan. In just over a decade Bestways cement production capacity is set to more than quadruple to over 6.0 million tonnes per annum, making Bestway the second largest cement producer in the country. In early 1992 when the Group decided to set up its first cement plant it faced multiple challenges mainly due to a lack of credibility as a business due to the absence of a track record in Pakistan. The domestic economy was highly inhospitable characterized by high interest rates, high inflation and low liquidity leading to a general economic and political inertia. It has however successfully exhibited its managerial dynamism and technical excellence in setting up and managing the manufacturing facilities and achieving market dominance through its diversification strategy by investing in the local cement industry and continues to be bullish about Pakistan. Even during the period of economic slowdown and recession in the country in the late 1990s which adversely affected the profitability of the industry Bestway was able to record pre tax profits even at 60% capacity utilization. The Company has been amongst the leaders in the recent market boom, operating at above 100% of its installed capacity.

Vision: Mission: Slogan:

History of the company

Hattar cement plant: The Group set up its first cement plant in 1995 in Hattar in the KP
Province of Pakistan, with an initial investment of US$ 120.0 million. The plants initial capacity was 0.99 million tonnes per annum, this was enhanced to 1.17 million tonnes per annum at a cost of US$ 10 million in 2002.

Chakwal-I cement plant:

Bestway Group expanded its operations by setting up a 1.8 million tonnes per annum cement plant in Chakwal, Punjab Province, Pakistan, at a cost of US$ 180.0 million.Civil works for Bestway Chakwal-I were initiated in January 2005, the Kiln was fired in May 2006 and the plant went into production in June 2006.

Chakwal-II cement plant:

In May 2006 the Group announced plans for a second 1.8 million tonnes per annum capacity plant adjacent to its existing operations in Chakwal at a cost of US$ 150.0 million. To augment its presence in the cement industry, Bestway bid for 85.29% equity of Mustehkam Cement Limited. The Companys bid of approximately US$ 70.0 million was accepted in September 2005. The plant started production in December 2005 just one month after acquisition. In 2010 the production capacity was further enhanced to 1.1 million tonnes per annum at a total cost of US$ 70.0 million. Over the last few years, Bestways cement capacity has increased from 1.1 million tonnes to 6.0 million tonnes per annum; Bestway Cement is the largest exporter of cement to Afghanistan and India.

Management structure: Nature of the business: Product and services: Narrative reports: DIRECTORS' REPORT: Directors report consists of following information,
Information regarding holding company: industry overview, production and sales, operating highlights, balance sheet( capital, reserves and liabilities), waste heat recovery power plant (not in 2011 report) other investment, plant performance and quality assurance, marketing, training and development, health safety and

environment, social responsibility, future prospects, corporate governance, pattern of share holding, Presentation of Financial Statements, books of account, accounting policies, application of international accounting standard , internal control system, listing regulation, financial highlights, board meeting attendance, auditors.

Auditors report:
Auditors have audited the unconsolidated balance sheet of Bestway Cement Limited and the related unconsolidated profit and loss account, unconsolidated statement of comprehensive income, unconsolidated cash flow statement and unconsolidated statement of changes in equity together with the notes forming part thereof, for the year then ended and they state that they have obtained all the information and explanations which, to the best of their knowledge and belief, were necessary for the purposes of their audit. It is the responsibility of the Companys management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Their responsibility was to express an opinion on these statements based on their audit. They conducted their audit in accordance with the auditing standards as applicable in Pakistan. These standards require that they plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the unconsolidated financial statements. They believe that their audit provides a reasonable basis for their opinion.

Chapter no 2:
ANALYSIS OF THE FINANCIAL STATEMENTS BALANCE SHEET OF 5 YEARS:

YEAR ASSETS

2011

2010

2009

2008

2007

Rupees

Rupees

Rupees

Rupees

Rupees

Non-Current Assets
Property, plant and equipment Intangible assets Investment property Long term investments Long term advances Long term deposits Total Non-Current Assets 16,433,331,467 25,596,250 345,814,453 7,409,408,407 20,015,000 71,450,847 24,305,616,424 16,866,396,926 30,000,000 340,715,834 6,096,182,548 24,018,000 70,450,847 23,427,764,155 16,991,285,086 336,340,149 5,297,909,985 720,741,010 70,450,847 23,416,727,077 1 6,004,481,991 2 91,330,764 5 ,297,902,301 3 2,024,000 307,325,047 7 0,450,847 2 1,696,189,903 20,274,630,869 14,175,374,753 277,155,456 5,514,775,613

Current Assets
Stores, spare parts and loose tools Stock in trade Trade debts - considered good Advances Deposits and prepayments Other receivables Interest accrued Due from Government agencies Bank balances Total Current Assets 2,377,548,437 1,190,297,675 276,921,829 227,774,295 31,649,484 59,121,344 76,190 826,104,396 114,142,111 5,103,635,761 2,167,264,132 785,462,819 297,188,037 395,685,381 7,619,146 30,579,142 62,490 823,532,386 187,776,744 4,695,170,277 1,779,660,333 1,056,308,381 585,065,905 288,323,020 9,041,107 72,295,479 89,941 562,639,377 452,291,805 4,805,715,348 1 ,719,953,575 7 29,726,744 3 65,120,641 1 51,886,489 2 1,630,011 2 ,755,566 98,671 3 79,555,280 3 48,573,987 3 ,719,300,964 886,327,763 2,806,801,429 482,675,425 1,062,334,034 290,830,696 84,633,511

TOTAL ASSESTS

29,409,252,185

28,122,934,432

28,222,442,425

2 5,415,490,867

23,081,432,298

Rupees Authorized capital

700,000,000 (2010: 350,000,000) ordinary shares of Rs. 10 each Issued, subscribed and paid up share capital Share premium Surplus on measurement of available for sale investment to fair value Unappropriated profit Advance for issue of right shares 5,782,019,740 3,225,770,245 7,000,000,000

Rupees
3,500,000,000

Rupees
3,500,000,000

Rupees
3,500,000,000

Rupees
3,000,000,000

3,257,475,910 1,963,498,330

3,257,475,910 1,963,498,330

2 ,832,587,750 9 01,277,930 2 ,020,561,237 1 ,102,077,293

2,575,079,770 437,623,819 1,851,979,758 1,116,466,140

1,964,378,938 -

1,785,148,713 -

2,994,585,223 -

Non-Current Liabilities
Long term financing - secured Liability against assets subject to finance lease - secured Long term murabaha - secured Long term musharaka - secured Deferred liabilities Long term Advances 6,155,833,339 109,754,039 1,765,000,000 300,000,000 477,018,764 9,686,358,893 154,309,555 1,885,000,000 11,455,803,336 194,033,624 330,000,000 1 ,749,960 613,414,947 1 2,026,666,668 2 58,138,491 4 80,000,000 1 2,249,720 4 41,207,639 1,055,573,197 23,607,975 13,686,235,225 12,380,000,005 227,054,048

386,112,881

8,807,606,142

12,111,781,329

12,595,001,867

1 3,218,262,518

Total Non-Current Liabilities

Current Liabilities
Trade and other payables Markup accrued Short term borrowings - secured Current portion of long term financing Current portion of liability against assets subject to finance lease Current portion of long term murabaha 1,630,407,258 195,752,140 4,104,960,036 3,530,555,556 47,802,130 120,000,000 1,558,426,981 278,889,458 3,584,835,474 3,419,444,445 43,433,792 120,000,000 1,355,336,265 341,291,606 2,385,747,374 3,170,833,334 3 8,672,516 120,000,000 1 ,542,716,340 2 86,999,641 1 ,507,674,824 1 ,943,333,334 693,718,916 260,111,697 756,384,619 1,703,832,354 -

6 0,000,000

Total Current Liabilities

9,629,477,120

9,005,030,150

7,411,881,095

5 ,340,724,139

3,414,047,586

Total

29,409,252,185

28,122,934,432

28,222,442,425

2 5,415,490,867

23,081,432,298

INCOME STATEMENT OF 5 YEARS

Year

2011 Rupees

2010 Rupees 1 3 ,333,062,606 1 1,564,255,751

2009 Rupees 14,814,797,196 10,044,450,173

2008 Rupees 7 ,487,162,751 6 ,478,902,770

2007 Rupees 5,649,378,012 4,636,508,040

Turnover - net CGS

1 3 ,332,366,906 1 0,418,537,089

G.PROFIT

2 , 913,829,817

1 , 768,806,855

4,770,347,023

1 ,008,259,981

1,012,869,972

Administration expenses Distribution expenses Finance Cost Other operating income Other operating expenses

1 57,092,809 3 51,032,163 2 , 489,299,031 ( 5 07,731,792) -

1 2 3,548,579 1 ,074,655,856 2 ,223,124,658 ( 2 40,527,682) -

140,138,550 1,395,877,311 2,286,086,256 (327,972,309) 71,506,461

1 19,917,940 3 00,827,927 1 ,236,140,238 (229,490,785) -

103,121,152 38,278,894 1,211,745,924 (396,632,200)

Profit / (loss) before taxation 4 24,137,606 Taxation Profit / (loss) for the year ( 2 44,907,381) 1 79,230,225

( 1 ,411,994,556) 2 0 2,558,046 ( 1 ,209,436,510) Restated

1,204,710,754 (230,686,768) 974,023,986

(419,135,339) 5 87,716,818 1 68,581,479 Restated

56,356,202 4,817,471 51,538,731

Earnings / (loss) per share - basic 0 .57 and diluted

( 3 .95)

3.17

0.59

0.20

HORIZONTAL ANALYSIS:
Comparison of two or more year's financial data is known as horizontal analysis. Horizontal analysis is facilitated by showing changes between years in both dollar and percentage form. Here all the balance sheet or income statement figures for a base year equal 100 and subsequent financial statement items are expressed as percentages of their values in the base year. BALANCE SHEET: (%)
YEAR ASSETS 2011 2010 2009 2008 2007

Non-Current Assets
Property, plant and equipment Intangible assets Investment property Long term investments Long term advances Long term deposits Total Non-Current Assets

115.9287 85.32083 124.7727 134.3556 6.512648 23.24928 119.8819

118.9838 100 122.9331 110.5427 7.815178 22.92389 115.5521

119.8648 121.3543 96.06755 234.5208 22.92389 115.4977

112.9034 105.1146 96.06741 10.42024 22.92389 107.0115

100 100 100 100 100

Current Assets
Stores, spare parts and loose tools Stock in trade Trade debts - considered good Advances Deposits and prepayments Other receivables Interest accrued Due from Government agencies Bank balances Total Current Assets

223.8042 409.2751 327.2012 47.18995 6.557095 12.24867 77.2162 217.6506 12.87809 181.831 127.4152 233.3333 224.5375 357.9107 106.0691

204.0097 270.0756 351.147 81.97753 1.578524 6.335343 63.33168 216.973 21.18593 167.2783 121.8422 116.6667 126.5 217.8571 96.39137

167.5236 363.2039 691.2934 59.73435 1.873124 14.97807 91.15242 148.2365 51.02986 171.2168 122.2734 116.6667 126.5 217.8571 161.6964

161.9033 250.9112 431.4138 31.46762 4.481275 0.570894 100 100 39.32789 132.5103 110.1123 116.6667 110 100 109.1028

100 100 100 100

100 100 100 100 100 100 100

TOTAL ASSESTS

Authorized capital
700,000,000 (2010: 350,000,000) ordinary shares of Rs. 10 each Issued, subscribed and paid up share capital Share premium Surplus on measurement of available for sale investment to fair value Unappropriated profit

Advance for issue of right shares

98.71122

100

Non-Current Liabilities
Long term financing - secured Liability against assets subject to finance lease secured Long term murabaha - secured Long term musharaka - secured Deferred liabilities Long term Advances

49.72402 48.33829 367.7083 2449.036 45.1905 64.35375

78.24199 67.9616 392.7083 36.5785 88.49608

92.53476 85.45702 68.75 14.28571 58.11202 92.02678

97.14593 113.6903 100 100 41.79792 96.58071

100 100

Total Non-Current Liabilities Current Liabilities

Trade and other payables Markup accrued Short term borrowings - secured Current portion of long term financing Current portion of liability against assets subject to finance lease Current portion of long term murabaha

100 100 100

235.0242 75.25695 542.708 207.2126 123.6075 200 282.0546 127.4152

224.6482 107.2191 473.9435 200.6914 112.3118 200 263.764 121.8422

195.3725 131.2096 315.4146 186.1001 100 200 217.0995 122.2734

222.3835 110.3371 199.3265 114.0566 100 156.4338 110.1123

100 100 100 100

Total Current Liabilities

Total

100 100

Interpretation:

INCOME STATEMENT: (%)

Year Turnover - net CGS G.PROFIT Administration expenses Distribution expenses Finance Cost Other operating income Other operating expenses Profit / (loss) before taxation Taxation Profit / (loss) for the year Earnings / (loss) per share - basic and diluted 2011 2010 2009 2008 2007

235.9971 224.7065 287.6805 152.3381 917.0384 205.4308 128.0107

236.0094 249.4174 174.6332 119.8092 2807.437 183.4646 60.6425

262.2377 216.6383 470.9733 135.897 3646.598 188.6605 82.68928

132.5307 139.7367 99.5449 116.2884 785.8846 102.0132 57.85985

100 100 100 100 100 100 100

752.6015 5083.733 347.7583

-2505.48 4204.655 2346.66

2137.672 -4788.55 1889.887

-743.725 121.997 327.0967

100 100 100

285

-1975

1585

295

100

Interpretation:

VERTICAL ANALYSIS:
Vertical analysis is the procedure of preparing and presenting common size statements. Common size statement is one that shows the items appearing on it in percentage form as well as in dollar form. Each item is stated as a percentage of some total of which that item is a part. Key financial changes and trends can be highlighted by the use of common size statements. Here all the balance sheet items are divided by total assets and all the income statement items are divided by net sales or revenue. BALANCE SHEET: (%)
YEAR ASSETS 2011 2010 2009 2008 2007

Non-Current Assets
Property, plant and equipment Intangible assets Investment property Long term investments Long term advances Long term deposits Total Non-Current Assets

55.8781 0.087035 1.17587 25.19414 0.068057 0.242954 82.64616

59.97382 0.106675 1.211523 21.67691 0.085404 0.25051 83.30484

60.20487 62.97137 61.41462 1.191747 18.77198 2.553787 0.249627 82.97201 1.146272 20.84517 0.126002 0.277196 85.36601 1.200772 23.89269 1.331482 87.83957

Current Assets
Stores, spare parts and loose tools Stock in trade Trade debts - considered good Advances Deposits and prepayments Other receivables Interest accrued Due from Government agencies Bank balances Total Current Assets

8.084355 4.047358 0.941615 0.774499 0.107617 0.20103 0.000259 2.808995 0.388116 17.35384 100

7.706394 2.792962 1.056746 1.406985 0.027092 0.108734 0.000222 2.92833 0.6677 16.69516 100

6.305834 3.742796 2.073052 1.021609 0.032035 0.256163 0.000319 1.993589 1.602596 17.02799 100

6.767344 2.871189 1.436607 0.597614 0.085106 0.010842 0.000388 1.493401 1.371502 14.63399 100

4.602548 1.26002 0.366674 2.091185

3.840003 12.16043 100

TOTAL ASSESTS

Authorized capital
Issued, subscribed and paid up share capital

23.80203 12.44536 12.40148 13.77113 12.99746 19.66055 11.58299 11.54215 11.14512 11.1565

Share premium Surplus on measurement of available for sale investment to fair value Unappropriated profit Advance for issue of right shares

10.96856 6.98184

6.957223 3.546176

1.895999 6.679459 6.347662 10.61065 7.950117 8.023678 4.336242 4.837075

Non-Current Liabilities
Long term financing - secured Liability against assets subject to finance lease secured Long term murabaha - secured Long term musharaka - secured Deferred liabilities Long term Advances

20.93162 34.44292 40.59111 47.32022 53.63619 0.373196 0.548696 0.687515 1.015674 0.983709 6.001513 6.702714 1.169282 1.888612 1.020087 0.006201 0.048198 1.622002 1.372947 2.173501 1.735979 4.573257 0.102281 29.94842 43.06727 44.62761 52.00868 59.29543

Total Non-Current Liabilities Current Liabilities

Trade and other payables Markup accrued Short term borrowings - secured Current portion of long term financing Current portion of liability against assets subject to finance lease Current portion of long term murabaha

5.543858 0.665614 13.95806 12.00491

5.541481 0.99168 12.74702 12.15892

4.802335 1.209292 8.45337 11.23515

6.069984 1.129231 5.93211 7.646255

3.005528 1.12693 3.277026 7.381831

0.162541 0.154443 0.137028 0.408035 0.426698 0.425194 0.236076 32.74302 32.02024 26.26237 21.01366 14.79132 100 100 100 100 100

Total Current Liabilities

Total

Interpretation:

INCOME STATEMENT: (%)

Year Turnover - net CGS G.PROFIT Administration expenses Distribution expenses Finance Cost Other operating income Other operating expenses Profit / (loss) before taxation Taxation Profit / (loss) for the year Earnings / (loss) per share - basic and diluted 2011 2010 2009 2008 2007

100 78.14469225 21.85530775 1.178281472 2.632932063 18.67109605 3.808264471

100 86.73367922 13.26632078 0.926633157 8.060082576 16.67377349 -1.80399424

100 67.80012 32.19988 0.945936 9.422183 15.4311 -2.21382 0.482669 8.131807 -1.55714 6.57467

100 86.53348 13.46652 1.601647 4.017916 16.51013 -3.06512

100 82.07112 17.92888 1.825354 0.677577 21.44919 -7.02081

3.181262629 1.836938503 1.344324127

-10.5901742 1.519216192 -9.07095801

-5.59805 7.84966 2.251607

0.997565 0.085274 0.91229

4.28E-09

-2.94E-08

2.14E-08

7.88E-09

3.54E-09

Interpretation:

Ratio analysis: